AM Best has downgraded the debt ratings of two of Montana Re’s variable rate notes.

The ratings agency downgraded the debt rating to “b” from “bb-“ on $100m series 2009-1 Class A and to “ccc” from “b” on $75m series 2009-1 Class B variable rate notes. Both notes are due 7 December 2012.

Both ratings have been removed from under review with negative implications and assigned a stable outlook.

The notes, which provide protection for Flagstone Re against US hurricane and earthquake, were downgraded following the release of RMS v.11 US Hurricane Model.

AM Best said the recently-submitted new probabilities showed a “significant increase” when compared with the probabilities calculated on initial models.

The notes provide Flagstone Re with three years of protection (30 November 2009 to 30 November 2012) based on a modified property claim services index trigger on a per occurrence basis.