Arch Capital Group Ltd. agreed to take complete ownership of Gulf Reinsurance Ltd. after losses on a venture that was backed by oil-producing nations.

Arch will also take on liabilities from insurance contracts written in prior periods, the Bermuda-based company said yesterday in a statement that didn’t disclose terms.

Gulf Re’s financial strength rating was placed under review, with negative implications, by A.M. Best in September. The ratings firm said yesterday that the Dubai-based business will probably post a loss of $20 million to $30 million this year, which would push capital and surplus below the $200 million figure from when the reinsurer was founded.

“Gulf Re’s underwriting performance remains under considerable strain,” A.M. Best said in a note. “The primary driver of the weak performance in recent years is a higher-than- expected frequency of large losses.”

The ratings firm said it would extend its evaluation of the rating and resolve the review after the deal is completed. Arch said it entered the agreement to support the venture in advance of the Jan. 1 renewal season and that the deal requires approval from the Dubai Financial Services Authority.

Arch has said it provided $100 million in 2008 and took a 50 percent stake with Gulf Investment Corp. owning the rest of the reinsurer. Gulf Re focused on coverage in GIC’s six member states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, Arch said in a 2009 filing.

“With the new strategic initiatives in place, we believe that Gulf Re is strongly positioned for opportunities in the marketplace,” Arch said in the statement.

Constantine Iordanou, the chief executive officer of Arch, has sought to diversify operations at the insurer. This year the company announced it would run reinsurance for a new company called Watford Re Ltd., with JPMorgan Chase & Co.’s Highbridge Principal Strategies LLC managing junk bonds for the venture. Arch last year agreed to add assets from bankrupt mortgage insurer PMI Group Inc.