Bermuda-based insurer Arch Capital yesterday announced it had entered into an unsecured $300 million credit facility with a syndicate of banks led by JPMorgan and Banc of America.

The new bank facility, which is in the form of a 364-day revolving credit agreement with an option to convert that into a two-year term loan at expiration, will reportedly provide the company capital to support its growing insurance and reinsurance businesses.

Arch added that it would also be used to support "other general corporate purposes". Arch Capital Group has approximately $1.6 billion in equity capital and provides insurance and reinsurance on a worldwide basis through its wholly owned subsidiaries. Meanwhile, leading rating agency AM Best gave Arch Capital subsidiary Arch Reinsurance its continued thumbs up.

This week it affirmed if A- (Excellent) financial strength rating.

It also gave that rating a stable outlook, an indication that any downgrade was unlikely. In making its announcement, Best said: "The rating reflects Arch's excellent risk-adjusted capitalisation and solid operating performance since its inception in late 2001.

"Further, the strength of Arch's senior management team has enabled it to quickly build the necessary operating infrastructure to service a strong broker distribution network and to implement prudent underwriting and risk management controls within each of its business units."

The rating report continued: "Since commencing operations, Arch has attracted a well diversified book of business on both a direct and assumed basis, both geographically and by line of business.

"In 2002 and for the first half of 2003, the group has produced a combined ratio well below breakeven, benefiting from higher market rates, light catastrophes and an unencumbered balance sheet, while maintaining reasonable reserving assumptions.

"Furthermore, Arch's investment portfolio has remained conservative, with investments in high quality government and corporate fixed income securities."

But AM Best pointed out that Arch's rapid expansion was one potential area of weakness: "Partially offsetting these strengths is the aggressive underwriting leverage position of the company relative to other start-up operations, rapid expansion into primary insurance businesses and the overall casualty orientation of various insurance and reinsurance businesses."

The report concluded: "Over the past year Arch has significantly increased its business volume in casualty classes more rapidly than AM Best had originally anticipated..."