A.M. Best Co. has affirmed the financial strength rating of A- of Validus Reinsurance Ltd.

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating (ICR) of "a-" of Validus Reinsurance Ltd. (Validus) (Bermuda). Concurrently, A.M. Best has assigned an ICR of "bbb-" to Validus Holdings, Ltd. (Bermuda). The outlook for all ratings is stable.   
   
The rating affirmations reflect the solid capitalization of Validus and the successful execution of its first year business plan, which was presented to A.M. Best during the initial rating process in 2005. During the past year, Validus has continued to enhance its infrastructure, achieve acceptance in targeted markets and fill key positions with seasoned personnel while keeping A.M. Best fully apprised of its progress.    
   
Validus operates as a Bermuda based reinsurance company primarily focused on short-tail risk on a worldwide basis, including property catastrophe, marine and offshore energy coverages. In May 2006, Validus' fully collateralized sidecar, Petrel Re, was established by a third party investor to provide retro reinsurance coverage to Validus for marine and offshore energy lines of business. Although, this additional capacity allowed Validus to write more of these specific lines, overall premium volume remained in line with A.M. Best's expectations and risk-based capital remained fully supportive of its current rating level.   
   
Validus operates as a Bermuda based reinsurance company primarily focused on short-tail risk on a worldwide basis, including property catastrophe, marine and offshore energy coverages. In May 2006, Validus' fully collateralized sidecar, Petrel Re, was established by a third party investor to provide retro reinsurance coverage to Validus for marine and offshore energy lines of business. Although, this additional capacity allowed Validus to write more of these specific lines, overall premium volume remained in line with A.M. Best's expectations and risk-based capital remained fully supportive of its current rating level.   
   
In addition to meeting A.M. Best's previously established requirements for new company formations, Validus' ratings are a reflection of its ability to meet A.M. Best's stricter risk-based capital requirements for property catastrophe companies. These more stringent requirements necessitate a more conservative level of risk-based capital to support a company's ratings.   
   
Validus is susceptible to low frequency, high severity events, and in addition, A.M. Best anticipates that Validus will continue to be challenged by increased competition from established companies, sidecars and potential new start-ups seeking to enter the industry. Moreover, the recent legislation in Florida relative to Citizens Property Insurance Corp and the Florida Hurricane Catastrophe Fund presents a significant challenge to all property catastrophe reinsurers writing Florida business, including Validus. All of these factors could dampen expected returns if pricing of reinsurance coverage fails to meet anticipated levels.   
   
The ability of Validus to effectively build and retain market acceptance will only be proven over time. A.M. Best will continue to closely monitor the performance of Validus against its stated business plan.   
   
For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.