One of Bermuda's seven new insurers Arch Re, has been rated A minus (excellent) by ratings US agency A.M. Best.

Yesterday's rating, which are used by companies and individuals as a method of rating the financial strength of a company for investment purposes, is the second to be issued on the new wave of companies which have raised almost $7 billion in capital and were set up in the hardening insurance market in the wake of the September 11 attacks.

Best has been in Bermuda for the past week rating the new companies that have rushed to set up in the past two months and issued the same rating on Wednesday to Axis Specialty.

The Arch Capital Group Ltd., which owns Arch Re Ltd. (Bermuda) and Arch Re Co. (US), announced the rating yesterday.

In assigning the rating, A.M. Best noted that among other attributes, Arch Capital has strong capitalisation and recognised management expertise in the reinsurance market.

It said: "To meet the increased demand for reinsurance capacity, the group launched an initiative to establish a significant new reinsurance entity."

In November 2001, Arch Capital increased its capital base to more than $1 billion following the completion of a private equity financing led by the firms Warburg Pincus and Hellman & Friedman.

Arch Re Bermuda is being capitalised to increase its surplus to approximately $500 million, and Arch Re US is being capitalised to increase its surplus to approximately $250 million.

Paul Ingrey, Chief Executive Officer of Arch Re Bermuda, said: "The rating is another indication that we are well positioned to serve the market's increased demand for reinsurance capacity."

Arch Capital Group Ltd., a Bermuda-based company, provides insurance and reinsurance on a global basis through its wholly owned subsidiaries.

Best said: "The initial rating reflects the company's strong capitalisation and recognised management expertise in the reinsurance market. In addition the rating considers the group's conservative limits profile and catastrophe management strategies."

But it added that these strengths were offset by the "challenges associated with a start-up operation". It added: "New capital has rapidly entered the market to take advantage of short-term price hardening. This additional capacity may suppress necessary price firming and pressure future margins. Best will closely monitor Arch Reinsurance's operation and exposure accumulations during its start-up to ensure that targeted results are attained."

Yesterday another of the new wave of insurance companies, Axis Specialty, was assigned the same A minus (excellent) rating by Best.

The newly formed company was set up nine weeks ago in following the expected shortage of insurance and reinsurance in wake of the September 11 attacks.

Axis was been capitalised with $1.7 billion through a private placement equity offering led by Trident II, L.P., a private equity fund managed by MMC Capital, Inc, which is a subsidiary of Marsh and McLennan.

AM Best said as it announced the rating on Wednesday: "The rating reflects Axis Specialty's strong initial capital base, experienced management team and strong sponsorship."

Axis Specialty said it expects to write business focused on short-tail lines, principally property, catastrophe, aviation and marine reinsurance along with primary specialty lines in property, marine, energy and space lines of business.