A1 counterparty ratings to Bermuda-based startup Arrow Reinsurance Co. Ltd.

Arrow Re is a wholly owned subsidiary of Goldman Sachs Group, L.P. which is using the company as a vehicle to enter the insurance risk securitisation market.

Moody's structured finance group vice president Lawrence Kwoh said the company will enter into reinsurance contracts with cedants and will use a strategy of matching books to lay off most risks it takes through swaps or securitisation.

As an intermediary between capital markets and the reinsurance/insurance markets Goldman hopes to earn a spread.

Goldman is obligated to maintain Arrow Re's statutory net worth to $1 million all the time and provide funds of up to $1 billion.

Allan Murray of Moody's insurance group noted that intense competition in traditional markets has made it difficult for the success of insurance securitisation.

He added that Arrow Re's affiliation with Goldman Sachs will provide the new company access to institutional relationships.