A.M Best Assigns Rating to Kepler Holdings Limited's Senior Secured Credit Facility.

OLDWICK, N.J. -- A.M. Best Co. has assigned a debt rating of "bb-" to the $200 million senior secured term loan (the term loan) due June 2009, of Kepler Holdings Limited (the issuer), a newly created Bermuda exempted, special purpose company. The rating outlook is stable.

The primary business purpose for the creation of the issuer, in addition to raising proceeds from the issuance of the term loan, is to subscribe to the shares of Kaith Re Limited (Kaith Re), an existing licensed Bermuda class 3 reinsurer registered under the Bermuda Segregated Accounts Companies Act 2000. Proceeds of the term loan will be contributed by the issuer to Segregated Account Kepler Re, a newly formed segregated account of Kaith Re.

Upon closing of the term loan, Kaith Re, acting in respect of Segregated Account Kepler Re, will enter into an excess of loss (XOL) reinsurance agreement with Hannover Rueckversicherung AG and its affiliates, E+S Rueckversicherung AG and Hannover Re (Bermuda) Limited (collectively known as cedant) to provide $200 million of aggregate indemnity protection covering pre-defined segments of the cedant's global natural catastrophe property reinsurance portfolio over a 22 month period beginning March 1, 2007. Under the XOL reinsurance agreement, specific reinsurance attachment and exhaustion points are calibrated for each calendar period. The cedant retains defined layers of risk before the attachment as well as after the exhaustion of the XOL reinsurance, which creates an incentive for the cedant to produce and retain quality business.

Proceeds from the issuance of the term loan and reinsurance premiums are deposited into a collateral trust account and premium trust account, respectively. The deposited funds are available to pay losses required to be made under the XOL reinsurance agreement and payments (interest costs) in respect of the term loan.

The assigned rating represents an opinion as to the issuer's ability to meet its financial obligations to security holders when due. The rating of the term loan takes into consideration a multitude of factors including the modeled probability of attachment (i.e., the first dollar of loss) of 1.2% (per annum) as provided by the cedant; a review of the cedant's underwriting policies and risk management; and a review of the structure and the legal documentation surrounding the structure. In addition, the rating acknowledges an assessment of the cedant's ability, under the XOL reinsurance agreement, to make periodic reinsurance premium and expense reimbursement payments and, if necessary, collateral deficiency payments (amounts equal to any diminution in the value of the assets held in the collateral trust account resulting from investment losses).

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.