AM Best Co. has assigned a financial strength rating of A- and an issuer credit rating of ?a-? to new Bermuda start-up Validus Reinsurance Ltd. The ratings have a stable outlook.

Validus, which received its licence from the Bermuda Monetary Authority in October, will primarily focus on property catastrophe and marine and energy coverage on a worldwide basis through the broker market. The company will be capitalised with approximately $1 billion in common equity from investors, which include Aquiline Capital Partners LLC, Merrill Lynch Corporation and Goldman Sachs.

It is among 11 companies that moved to start up in Bermuda in the wake of the 2005 hurricane season on the prospect of higher pricing for various types of insurance and reinsurance policies come up for renewal.

AM Best?s ratings reflect the company?s ?solid capitalisation, experienced management team and sound business plan?, Best said, adding that the ratings assignment reflects the fact that it has met Best?s established requirements for new company formations as well as Best?s stricter risk-based capital requirements for property catastrophe companies.

Best expressed concern over the the fact that several key operational positions remain vacant at a time when a tight employment in Bermuda may cause an issue in attracting and retaining key personnel.

However, despite risk that this could be detrimental to Validus? ability to fully execute its current business plan, Best said the overall strength of management, existing infrastructure, distribution capability and capital resources are sufficient to warrant the current ratings.

Besides being susceptible to low frequency, high severity events, AM Best anticipates that Validus will be challenged by increased competition from both established companies and other new start-ups seeking to enter the industry.

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

Any material negative deviations from Validus? stated business plan in terms of management, earnings, capitalisation or risk profile could result in downward pressure on the assigned ratings, Best said.