Class of 2005 reinsurer Flagstone Reinsurance Ltd. and Flagstone Reassurance Suisse SA have been affirmed their 'A-' insurer financial strength (IFS) ratings by Fitch Ratings.

And AM Best Co. has also affirmed the financial strength ratings of A- (excellent) and issuer credit ratings (ICR) of "a-" of Flagstone Reinsurance Ltd. and Flagstone Reassurance Suisse SA.

Fitch said the ratings reflect the companies' (collectively Flagstone) strong capital position, recent favourable operating results, and well-designed risk management practices and operating platforms. Partially offsetting these positives are the effects of the company's limited operating history and comparatively small size in the global reinsurance market.

Fitch believes that Flagstone uses a rigorous underwriting process to evaluate potential insured risks' zonal aggregate limits, pricing adequacy, and return characteristics on both an individual contract and portfolio basis.

Additionally, Fitch believes that Flagstone's capital position provides strong protection against the underwriting and investment risks the company faces.

Flagstone has gradually diversified beyond its roots as a property/catastrophe reinsurer with a North American focus, according to the ratings agency. Fitch views Flagstone's diversification strategy favourably because it reduces the company's reliance on any single product and market and reduces its proportionate earnings and capital exposure to catastrophe-related losses.

Best said its action reflected the group's strong risk-based capitalisation, solid operating results to date and continued development of the organisation's operating platforms as it matures through its start-up phase.

The strong level of risk-adjusted capitalisation reflects Best's stricter guidelines for property catastrophe companies and new formations. The affirmations also consider the group's diversification into new territories and lines of business via strategic investments.

Additionally, Best said, the ratings reflect the group's expertise in catastrophe modeling and its ability to leverage its operating efficiencies utilising a global platform.

Best claimed that partially offsetting these positive rating attributes is the group's unique investment strategy utilising an in-house portfolio optimisation model, which has not yet been tested over a significant period of time.