Validus Reinsurance Ltd. has had its A- (excellent) financial strength rating affirmed by AM Best.

The New Jersey-based ratings agency also affirmed also the Bermuda-based reinsurer's issuer credit rating at "a-", with a stable outlook for all ratings.

"The ratings reflect Validus' solid risk-adjusted capitalisation, favourable operating performance since inception, experienced management team and prudent operating strategies," AM Best said in its commentary. "The ratings also consider the support of Validus Holdings, which provides financial flexibility as a publicly traded company.

"Partially offsetting these strengths is Validus' susceptibility to high severity losses, which is inherent in a catastrophe-focused property reinsurer. However, the company's risk-adjusted capital remains at levels that have been stress tested to absorb significant catastrophe losses, mitigating this concern. The stable outlook reflects the expectation that operating performance and risk-adjusted capitalisation will remain supportive of the current rating levels."

AM Best added that despite its relatively short existence, Validus's risk management has proven effective thus far as evidenced by its overall operating performance during 2008 and since its inception in 2005.

AM Best expects the rate environment in property catastrophe, marine and offshore energy — Validus's primary lines of business — to be favourable over the short term due to a lack of capacity and an increase in demand for reinsurance.

"Validus is well positioned to take advantage of the market opportunities presently available in its core lines of business," Best's statement added.

A.M. Best also affirmed the ICR of "bbb-" of Validus Holdings Ltd. and the indicative ratings of "bbb-", "bb+" and "bb" of senior debt, subordinated debt and preferred stock shelf registration, respectively, of Validus Holdings.