Validus Reinsurance Ltd. has been affirmed the ‘A-’ Insurer Financial Strength (IFS) rating by Fitch Ratings.Fitch has also affirmed Validus’ ‘BBB+’ Issuer Default Rating (IDR), ‘BBB’ senior unsecured notes rating, and ‘BB+’ rating for Validus’ junior sub-ordinated debt instruments. The rating outlook is stable.The affirmations reflect Validus’ continued record of strong underwriting profitability, solid capitalisation, and high-quality and liquid investment portfolio that supports the company’s loss reserves.The ratings also consider Validus’ significant exposure to earnings and capital volatility derived from its property catastrophe reinsurance products, most recently evidenced by the company’s roughly $320 million of combined losses from the Chilean and New Zealand earthquake events in the first nine months of 2010. Validus’ ratings also reflect its comparatively short operating history and rapid growth, as well as the current competitive market conditions and low interest rate environment.Fitch believes that Validus’ capitalisation provides adequate protection for the underwriting and investment risks the company faces. Fitch views Validus’ capitalisation as characterised by reasonable operating leverage ratios, including annualised net premiums-to-equity of 0.55 times for the first nine months of 2010, and a moderate debt-to-capital ratio (including hybrid securities) which was roughly 13 percent at September 30, 2010. Fitch anticipates that these ratios are likely to head moderately higher in the short-term, as the company has continued to repurchase common equity in the fourth quarter of 2010.Fitch considers Validus’ acquisitions of IPC Holdings Ltd in September 2009 and Talbot Underwriting Agency Ltd in 2007 to be significant contributors to the company’s success to date in building a viable business platform. The ratings agency believes that the characteristics of the acquired companies mitigated, but did not eliminate, the risks that typically accompany such acquisitions.However, Fitch also views Talbot’s comparative rapid premium growth with some concern given competitive conditions in the Lloyd’s market in which it operates. Talbot’s gross premiums have grown by eight percent year-to-date, following a more significant 30 percent increase in 2009. Fitch noted that Validus has offset a meaningful amount of this growth through the purchase of increased reinsurance on this book of business.