Omega Insurance Holdings Ltd.'s ICR has been removed from under review with negative implications and affirmed the rating of "bbb" by AM Best Europe - Rating Services Ltd.

Omega Specialty Insurance Company Ltd. (OSIL) has been affirmed the FSR of A- (excellent) and ICR of "a-".

All ratings have been assigned a stable outlook.

The ratings of Omega and OSIL had been placed under review reflecting the uncertainty regarding Omega's board composition, operational management and future strategy.

Following the appointment of a new board and CEO and a wide-ranging review of Omega's operations by the chairman and CEO, Best's concerns have been alleviated.

The ratings of OSIL reflect the expectation that its risk-adjusted capitalisation will remain excellent in 2010, as the company continues to benefit from the funds transferred from Omega following a successful capital-raising exercise at the end of 2008. OSIL's risk-adjusted capitalisation is further enhanced by a comprehensive reinsurance programme that limits its exposure to major losses.

A strong operating performance by OSIL in 2009 produced profits of $44.5 million. However, following major market losses in the first half of the year, including the Chilean earthquake, Deepwater Horizon oil rig disaster, Aban Pearl gas rig and Australian hailstorms and a strengthening of claims reserves, a weaker underwriting performance is anticipated in 2010, with a combined ratio of almost 100 percent.

Investment income is likely to be higher than in 2009, with the continued strong performance in bond markets. OSIL is expected to continue to conform to the group's conservative reserving and reinsurance strategy.

OSIL continues to benefit from the strong market profile of Omega and Lloyd's Syndicate 958 (UK). Approximately 70 percent of the company's business in 2010 is expected to be associated with syndicate 958's underwriting through a 20 percent whole account quota share reinsurance arrangement with the syndicate and the reinsurance of ODL (Omega's corporate member at Lloyd's, which has increased its ownership of the syndicate's capacity to 38.8 percent in 2010 from 16.4 percent).

Business written directly by OSIL is expected to remain stable, and a modest increase is anticipated in business derived from Omega US, for which OSIL underwrites a 50 percent whole account quota share.