Tower Group International says it needs to strengthen lossreserves by about $365 million for accident years 2009-2011,resulting in an impairment charge of $215 million for the secondquarter.

The Hamilton, Bermuda-based says about $185 million isattributable to U.S. subsidiaries.

The deposit bolster reserves in commercial lines, includingworkers' compensation, commercial property, commercial auto andother liability lines, due to “adverse loss emergence,coupled with changes in judgment, including actuarial factors,”says Tower in a statement.

The company says it has been shifting is business mix to getaway from the lines that have contributed to reserveshortfalls.

Other than the second-quarter goodwill charge of $215 million,Tower says it is evaluating other tangible assets associated withits commercial and specialty and reinsurance segments, as well asgoodwill in its personal segment.

Tower looks to announce second quarter results upon management'sevaluation. Public companies are now announcing schedulethird-quarter earnings releases.

Fitch Ratings promptly downgraded Tower Group's financialstrength rating to “BB” from “A-.”

“The company's inability to effectively place adequate controlson the loss reserving process where potential charges were firstannounced on Aug. 7 followed by additional events, including a dropin the company's share price and the lack of new capital raising,have led to a material weakening in the insurer's financialprofile,” says Fitch.

Earlier this year Tower Group said it was in line to buyAmerican Safety Reinsurance from Fairfax Financial Holdings onceFairfax completed a deal to purchase American Safety Holdings.

However, in August, Tower said it would receive $5 million to terminate the deal in order forFairfax to sell American Safety Reinsurance to CatalinaHoldings.