The financial strength of Bermuda-based Tokio Millennium Re has been affirmed as A+ (superior) by rating company AM Best.

The issuer credit rating for the company has also been assigned an "aa-". The outlook for both ratings is stable.

In a statement, AM Best said the ratings reflected: "TMR's excellent financial strength, overall favourable business performance and management profile.

"The excellent financial strength takes into consideration the parental support provided by TMR's parent, Tokio Marine and Nichido Fire Insurance Company (TMNF) and advanced risk management practice."

However, the agency does warn that the reinsurer could experience unfavourable short-run uncertainty because of the volatility of catastrophe risk and the cyclic pricing market of the industry.

AM Best notes: "However, in 2006, TMR implemented a new business plan to take the company into its second phase in order to achieve a more stable profile and to reduce volatility.

"The new approach consists of writing coverage further down into the mid to low property catastrophe layers and to diversify into other lines, such as terrorism, workers' compensation catastrophe and crop/hail business."

AM Best said it will monitor TMR's growth and additional catastrophe exposure "that may occur as a result of its participation in lower, more loss prone layers."