A.M. Best Co. has assigned an initial financial strength rating of A- (Excellent) to Montpelier Reinsurance Ltd., the newly formed Bermuda insurer.

A.M. Best said the company was created to satisfy underserved segments of the reinsurance market following the September 11 terrorist attacks and the company's capitalisation of $1 billion was financed with approximately $850 million of common equity, led by founders White Mountains Insurance Group and Benfield Group, along with $150 million of bank debt.

A.M. Best said: "Montpelier has engaged a highly experienced management team which will be led by Anthony Taylor, chief executive and underwriting officer, who has more than twenty five years experience in the London reinsurance market."

Montpelier seeks to establish a geographically diversified book of property and catastrophe reinsurance lines of business.

The A.M. Best report said of the rating: "The initial rating reflects the company's strong initial capitalisation, management expertise and sound sponsorship. Additionally, the rating considers Montpelier's conservative limits profile and catastrophe management strategies. As chief underwriting officer, Mr. Taylor will bring the company a strong underwriting track record in which he consistently outperformed the Lloyd's market, and a highly disciplined underwriting strategy that focuses on underwriting profits. Montpelier also benefits from the solid sponsorship of White Mountains Insurance Group, a Bermuda-based P&C holding company and Benfield Group, a leading global independent risk intermediary and advisory business."

However, A.M. Best said the strengths are offset by the challenges associated with a start-up operation, namely that new capital has rapidly entered the market to take advantage of short-term price hardening.