A.M. Best has revised the issuer credit rating (ICR) outlook to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and the ICR of “a” of Validus Reinsurance, Ltd. (Validus Re) (Hamilton, Bermuda), a subsidiary of Validus Holdings, Ltd. (Validus) (Hamilton, Bermuda) [NYSE:VR]. Concurrently, A.M. Best has downgraded the ICR to “a” from “a+” and affirmed the FSR of A (Excellent) of the following Validus subsidiaries: Western World Insurance Company, Stratford Insurance Company and Tudor Insurance Company (all companies headquartered in Franklin Lakes, NJ) to align the subsidiaries’ ICRs with that of Validus Re. A.M. Best also has revised the outlook for each of these ICRs to positive from stable. The outlook for the FSRs remains stable.

Additionally, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of “a” of Validus Reinsurance (Switzerland) Ltd (VRS) (Zurich, Switzerland). The outlook for each of these ratings is stable. A.M. Best also has affirmed the ICR of “bbb” and issue ratings of Validus, the ultimate parent company. The outlook has been revised to positive from stable for each of these ratings. All companies are domiciled in Keene, NH, unless otherwise noted. (See below for a detailed listing of the issue ratings.)

Western World Insurance Company, Stratford Insurance Company and Tudor Insurance Company have been extended the ratings of Validus Re in recognition of its strategic importance to the group, the explicit support provided through a material quota share agreement with Validus Re, as well as the implied support of future parental commitment. Validus completed its acquisition of these companies in late 2014.

The ratings of Validus Re reflect its strong risk-adjusted capitalization, solid operating performance since inception, experienced management team and excellent enterprise risk management program. The company's consistently positive operating results demonstrate the capability of producing results that are at the high end of its peer group. Validus Re has the expertise and capacity to write diverse books of business globally and is well-positioned to successfully manage through the competitive market environment. Additionally, the acquisition of Western World Insurance Company is expected to further enhance Validus’ capabilities in these areas. Further supporting the ratings is that Validus can provide financial flexibility as a publicly traded company on the New York Stock Exchange.

Partially offsetting these strengths are the company's exposure to high severity events as a property catastrophe-focused reinsurer and the increased competition from capital markets in this space. However, the company's risk-adjusted capital remains at levels that have been stress tested to absorb significant catastrophe losses mitigating this concern. Additionally, Validus Re has enhanced the business profile of the group by diversifying the company's revenues to include other lines of business (most recently into the excess and surplus market), spreading risk exposures geographically and expanding its distribution channels, which has increased its client base and scale.

The positive outlooks reflect A.M. Best's expectation that the group will continue to produce consistent long-term operating results in relation to its peers and maintain excellent risk-adjusted capitalization.

Rating factors that could lead to a rating upgrade would be the continuation of long term, consistently strong operating profitability relative to its peer group and maintaining strong risk-adjusted capital levels. Rating factors that could lead to a change in outlook or a rating downgrade include outsized underwriting losses relative to its peer group, resulting in a significant decline in risk-adjusted capital that would not be supportive of the current rating levels.

The following issue ratings have been affirmed, with the outlook being revised to positive from stable:

Validus Holdings, Ltd.—-- "bbb" on $250 million 8.875% senior unsecured notes, due January 2040

The following indicative ratings for securities available under the shelf registration have been affirmed, with the outlook being revised to positive from stable:

Validus Holdings, Ltd.—-- "bbb" on senior unsecured debt-- "bbb-" on subordinated debt-- "bb+" on preferred stock

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.

A.M. BestSusan Molineux, +1-908-439-2200, ext. 5829Senior Financial Analystsusan.molineux@ambest.comorSteven Chirico, +1-908-439-2200, ext. 5087Assistant Vice Presidentsteven.chirico@ambest.comorChristopher Sharkey, +1-908-439-2200, ext. 5159Manager, Public Relationschristopher.sharkey@ambest.comorJim Peavy, +1-908-439-2200, ext. 5644Assistant Vice President, Public Relationsjames.peavy@ambest.com

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