Best Removes Validus Ratings and Its Affiliates from Under Review

September 10, 2009

A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength ratings of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Bermuda-based Validus Reinsurance, as well as IPCRe Limited (Bermuda) and IPCRe Europe Limited (Dublin, Ireland) (collectively known as IPCRe).

Best has also removed from under review with negative implications and affirmed the ICR of “bbb-” and the indicative ratings for securities available under the shelf registration of “bbb-” on senior debt, “bb+” on subordinated debt and “bb” on the preferred stock of Validus Holdings, Ltd. The outlook assigned to the above ratings is stable.

In addition Best withdrew the ICR of “bbb-” and the indicative ratings of “bb+” on preferred stock, “bbb” on senior unsecured debt and “bbb-” on subordinated debt for securities available under the former shelf registration of IPC Holdings Ltd. “as these ratings have been merged out of existence.”

Best’s rating action follow the completion, on September 4, 2009, of Validus acquisition of IPCRe Holdings in exchange for a .9727 common voting share of Validus Holdings for each IPCRe common share and cash consideration of $7.50 per share.

“This effectively put IPCRe into run off as all renewal business going forward will be written by Validus,” said Best. “Management has indicated its intention to move capital from IPCRe to Validus commensurate with the movement of risk as business renews. A.M. Best will closely monitor this process to ensure capital is kept at levels that support the current ratings.

“The ratings contemplate the prospective benefits that will be realized through the acquisition due to the larger capital base and market profile. However, it will take time to truly gauge these prospective benefits’ impact on the Validus franchise.”

Best also noted that “Validus’ susceptibility to low frequency, high severity events as a property catastrophe focused reinsurer and the increased uncertainty over the short term due to the business that was previously underwritten by IPCRe,” should be considered as offsetting factors.

Best said the “stable outlook reflects the expectation that operating performance and risk-adjusted capitalization will continue to remain supportive of the current rating levels.”

Source: A.M. Best –

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