Omega Specialty Insurance Company Ltd. (Bermuda) (OSIL) has been affirmed the financial strength rating of A- (excellent) and issuer credit rating (ICR) of "a-" by AM Best Co.

The outlook for both ratings remains stable.

In Best's opinion, OSIL's risk-adjusted capitalisation is likely to remain excellent in 2008 and 2009, supported by increasing retained earnings. Additionally, OSIL benefits from the financial flexibility of its parent, Omega Insurance Holdings Ltd. (OIH), which has demonstrated its ability to raise funds to support the group's growth, the ratings agency said.

OSIL's financial flexibility, Best added, is further enhanced by a comprehensive reinsurance programme that limits its exposure to major losses.

Best anticipates a solid profit before tax above the £45 million achieved in 2007, despite deteriorating premium rates in a number of the company's business lines. The increase in profit is likely to be driven by premium growth in business derived from outside the Omega group and OSIL's new 50 percent whole account quota share reinsurance of Omega US Insurance, Inc (a wholly owned surplus lines subsidiary of OIH), which is likely to represent 10 percent of OSIL's gross written premium in 2008, it said.

Underwriting performance is likely to be supported by the underwriting discipline and solid risk control infrastructure in place throughout the Omega group. Furthermore, a change in the pace at which premiums are earned due to the impact of the new energy account written from March 2007 (through its quota share participation with Lloyd's Syndicate 958), and due to growth of the non-marine binder business (written through its quota share participation with Omega US), is expected to result in higher earnings in 2008. Investment income is likely to fall, owing to lower US interest rates.

Further ahead, Best believes OSIL's conformity with the group's conservative reserving and reinsurance strategy will support solid operating performance.