Imagine Insurance Company Limited (Imagine) are moving from strength to strength in the fledgling finite risk reinsurance market, and last week a report was released by Fitch IBCA, Duff and Phelps (Fitch) rating agency detailing the assignation of an "A" (strong) insurer financial strength rating.

Imagine is a Barbados-based general insurance company that was formed in September 2000 and licensed to conduct business in December 2000 and is the principal subsidiary of Imagine Reinsurance Holdings Limited (together the Imagine Group), a Bermuda based insurance holding company formed in conjunction with Imagine.

Fitch says the rating reflects Imagine's low volatility product line and conservative investment strategy and their report examines Imagine's operating strategies, competitive position, capitalisation, financial profile and discusses the rational for the ratings.

Analyst Donald Thorpe of Fitch said yesterday that coverage of Imagine was initiated in June and said of his companies methodology to assign the rating: "We looked at initial capital which was relatively strong at 200 million, as well as the experience of the principles."

He said the finite risk reinsurance business is characterised by relatively low underwriting risk and that Imagine was heavily structured to achieve this which was positive in terms of the rating assigned to the company.

However, Mr. Thorpe said that one of the negative aspects of Imagine Re was the fact that they are a startup and so did not have much of a track record and that by mid-year they had only done four to five transactions.

As far as future prospects for Imagine Re and the reinsurance market, Mr. Thorpe said yesterday: "Finite risk is becoming more accepted and it is no longer a new product."

He said this fact could go both ways as threats could come from increased competition but there could also be greater acceptance by customers to this type of reinsurance.

Founder and co-CEO of Imagine Thomas Gleeson said: "The issuance of the rating and appended report is an exciting further step for us as we continue to roll out our business platform. We have always sought a rating from Fitch so this is a milestone for us."

In July, the directors of Imagine Reinsurance Holdings Limited announced the acquisition by Imagine Insurance Company Limited of Delaware-domiciled Enterprise Re, a reinsurance group with consolidated shareholders equity exceeding $100 million.

At that time Mr. Gleeson said: "The purchase of Enterprise Re furthers the implementation of our very focused business model and is consistent with our previously stated goal of providing a unique financial services platform to the global insurance industry.

"This transaction further enables The Imagine Group to meet significant demand for structured insurance and reinsurance products that we are seeing in the market place today."

The Imagine Group now have offices in Barbados, Bermuda, New York, Dublin, Copenhagen, Basel and St. Louis.

Fitch said of the acquisition: "This transaction gives Imagine the opportunity to increase its underwriting and marketing presence with modest downside risk. The Enterprise acquisition also provides Imagine with approximately ten additional seasoned professionals and various insurance licenses and offices in the United States and Europe."

Fitch also said that Enterprise has a relatively low number of open insurance contracts and the purchase was structured to provide Imagine with significant protection against adverse development in either assets or liabilities for approximately one year.

As far as operating performance, Fitch said Imagine's performance had been "reasonable for a start-up operation" and that through mid-year 2001, Imagine had approved and bound four transactions and reported earned premiums of $405 million.

Imagine projects that written annual premium will initially grow to abut $900 million after five years, then level off and grow more modestly thereafter.

Imagine has also developed plans to add $150 - $500 million of additional preferred capital, but the current business plan is not dependant on this.

The Imagine Group's primary investors are its management and Canada based Trilon Financial Corporation, and although Imagine is considered a strategic investment of Trilon, they have made no contractual commitments to guarantee reserves or supply more capital if needed.

Trilon has also indicated no plans to take dividends out of Imagine, and Fitch says the insurer financial strength rating is therefore assigned to Imagine primarily on a stand-alone basis.