Ratings agency A.M. Best says it is applying stringent tests when assessing the financial viability of a wave of new insurance and reinsurance companies currently forming on Bermuda.

And said it expects to assign ratings in the coming days to several more reinsurers currently jockeying to be in position to sell 2006 policies on January 1, after handing ?A-? financial strength ratings to three of the new entrants.

In a conference call that attracted wide industry interest, including from brokers and insurance media, Best analysts said they were assessing the strength of management and whether the necessary infrastructure is in place when assigning initial financial strength ratings to a wave of start-ups, now referred to as the ?Class of 2005?.

Winning ratings from Best, the most influential agency to rate insurance companies, this week were Amlin Bermuda and Validus Reinsurance, and in prior weeks, New Castle Insurance Co. Ltd.

The wave of new incorporations ? ten major reinsurers have been licensed in Bermuda, and one in the Cayman Islands ? are gearing up to take advantage of an expected increase in 2006 premium pricing after record industry losses from the 2005 hurricane season.

Other 2005 start-ups that could be on Best?s radar include Ariel, Ascendant, Harbor Point and Lancashire.

The analysts would not be drawn on the total number of start-up reinsurers it is currently vetting, but indicated at least seven (including the three rated in recent days) had requested a rating.

The analysts said a company that is not assigned a rating to its liking, which would likely be the case for any company assigned a rating in the ?B? range or lower, could choose to go unrrated, and not have the information made public.

It did not rule out some companies being unsuccessful in earning an ?A-? rating, but analysts said they were ?generally pleased with what we observed?.

Ratings from AM Best are considered to be key to an insurance company?s business prospects, with an ?A-? rating or better considered de rigeur by many insurance buyers.

AM Best analysts last week visited the start-ups at their new Bermuda offices to make on-site assessments of infrastructure, and hold conversations with both senior and middle management.

The ratings firm said it was looking for the new companies to ?maintain conservative capitalisation? during the start-up phase, which is generally considered to be a company?s first five years.

It will only initiate financial strength ratings on a company that has its initial financing, sufficient capitalisation, financial flexibility, can withstand stress-tests for profitability, amongst other measures, and has in place experienced management able to implement a five-year business plan supported by all principals.

The companies must also demonstrate that they have key personnel positions filled or candidates identified, and should have a strong infrastructure, including systems and operation controls for underwriting, claims, investments and financial reporting.

?In many situations we have known these people for a long time. Some don?t even have to show us (their track records) because we already know it,? said one of the Best analysts on assessing management capabilities.

Those who are not well-known to the analysts are being asked to provide details on the volume of business they have underwritten in previous positions, and the loss ratio on that business.

With the formation of ten new companies, a high price has been put on the heads of insurance professionals, with competition to hire the best reaching a fever pitch.

Some of the start-up companies have been successful in luring away specialists from already established Bermuda rivals.

AM Best yesterday said this was something they were also watching closely. If an established company was to lose substantial intellectual capital, enough to warrant concerns that the impact could be material, the company?s ratings could come under review, Best said.

The insurance analysts participating on yesterday?s call were Matthew Mosher, group vice president, property and casualty ratings, and Karen Horvath, Robert DeRose, John Andre and Miles Trotter.