Class of 2005 reinsurer Ariel Reinsurance Company Ltd. has had its A- rating affirmed by ratings agency A. M. Best, which said it had successfully executed its business plan and had maintained the strict risk-based capital levels required for new reinsurers.

Ariel's parent, Ariel Holdings (Bermuda) Ltd. also received an issuer credit rating of bbb-. The outlook for all ratings is stable, which means Best does not expect them to change in the near term.

"The rating affirmations reflect Ariel's solid risk-based capitalisation and its successful first year execution of operations within the parameters of the business plan presented to A.M. Best during last year's initial rating process," the agency said,.

"In addition to meeting A.M. Best's established requirements for new company formations, the ratings also reflect Ariel's ability to sustain A.M. Best's stricter risk-based capital requirements for newly formed property catastrophe companies."

Best said that its initial concerns regarding Ariel's existing infrastructure and risk management capabilities have been alleviated through its significant system enhancements regarding pricing, exposure accumulations and claims. It said Ariel had also added experienced staff throughout the year.

Although Ariel ? which was formed by Bermuda insurance industry veteran Don Kramer ? made some adjustments to its business plan to take advantage of pricing opportunities, Best said it had fallen below its premium volume expectations for its first year and its risk-based capitalisation therefore remained within A.M. Best's initial expectations.

Best warned that Ariel was susceptible to low frequency high severity events and also faced increased competition from established companies and other new start-ups.

"The additional capacity brought to the market will dampen expected returns over the cycle if pricing of reinsurance coverage fails to meet anticipated levels," Best said. "Furthermore, the ability of Ariel to effectively build and retain market acceptance will only be proven over time.

Accordingly, A.M. Best will continue to closely monitor the quarterly performance of Ariel against its stated business plan, and any material negative deviations in terms of management, earnings, capitalisation or risk profile could result in downward pressure on the assigned ICR."