A.M. Best has affirmed the financial strength rating of A- (excellent) and the issuer credit rating (ICR) of “a-” of ‘class of 2005’ reinsurer Validus Reinsurance Limited.

In a statement yesterday, the ratings agency said the company had successfully executed its first-year business plan and had solid capitalisation.

Best said Validus had continued to enhance its infrastructure, achieve acceptance in targeted markets and fill key positions with seasoned personnel.

“In May 2006, Validus’ fully collateralised sidecar, Petrel Re, was established by a third party investor to provide retro reinsurance coverage to Validus for marine and offshore energy lines of business,” Best added.

“Although this additional capacity allowed Validus to write more of these specific lines, overall premium volume remained in line with Best’s expectations and risk-based capital remained fully supportive of its current rating level.”

Concurrently, Best assigned an ICR of “bbb-” to Validus Holdings Limited (Bermuda). The outlook for all ratings is stable.

“These more stringent requirements necessitate a more conservative level of risk-based capital to support a company’s ratings. Validus is susceptible to low frequency, high severity events, and in addition, A.M. Best anticipates that Validus will continue to be challenged by increased competition from established companies, sidecars and potential new start-ups seeking to enter the industry.

“Moreover, the recent legislation in Florida relative to Citizens Property Insurance Corp and the Florida Hurricane Catastrophe Fund presents a significant challenge to all property catastrophe reinsurers writing Florida business, including Validus.”