"We think there will be a comparatively narrow focus on catastrophe exposed business lines, and we think the investor base that has put a lot of money into these companies in some instances is likely going to have a shorter-term horizon than other insurers might have," he said.

He added that "management talent" for some of these quickly formed companies may be questionable. Historically, in three to five years, he said, "a lot of these companies may be writing different business lines, or they may have sold a piece of their business, or been acquired by a different company--it's almost like [keeping it going] involves a different skill set."

Mr. Rouck stated, "We think this raises the risk somewhat, that the companies tend to evolve and three to five years out they can look a lot different than they do today."

Given the role these reinsurers are likely to play in the January renewal season, Fitch said there are several factors affecting the quality of the reinsurers' credit.

The rating firm said the new ventures' premium rate increases are not expected to be broad-based and may be short-lived.

Fitch said premium rates are unlikely to experience significant and sustained increases across a broad spectrum of business lines in response to 2005's hurricane-related losses.

While the agency said it expected significant rate increases on property exposures in hurricane-prone areas, it believes premium rates on property-exposed business outside of these geographic areas, and premium rates on casualty-related business, are unlikely to increase materially in response to 2005's hurricane-related losses.

Fitch said significant uncertainties exist as to how long hard market conditions may last in the noted property lines that are expected to harden.

This contrasts with market conditions that existed following 9/11, when premium rates increased significantly across a broad spectrum of business lines, Fitch said. This resulted from a convergence of several factors, including years of inadequate pricing and subsequent adverse reserve development, equity market declines, and 9/11-related losses.

These factors, Fitch said, eroded the reinsurance sector's capital base and essentially imposed underwriting discipline on the reinsurance sector which became evident in the form of rate increases.

In contrast, the global reinsurance sector's 2005 hurricane-related losses, while staggering, followed two years of very strong earnings and capital formation. Fitch noted that the aggregate equity of approximately 30 global reinsurers it tracks on an on-going basis increased to $261 billion at year-end 2004 from $173 billion at year-end 2002.

To the extent the market opportunity leading to the formation of the Class of 2005 is narrow, and ultimately proves to be short-lived, this adds greatly to the uncertainty the reinsurers face in successfully executing their business plans, according to Fitch.

Fitch said the new reinsurers are likely to be narrowly-focused on property-catastrophe related business lines--a natural situation given the very large property-catastrophe related losses that have lead to the class's formation and corresponding lack of broad-based rate increases across other business lines.

However, Fitch said, this is a risk concentration with negative implications from a rating perspective.

Fitch noted concentrations on these lines are arising during a period in which its capital requirements for reinsurers with exposure to extreme events have increased.

According to the rating firm, the proportionately large amount of capital contributed by hedge funds and private equity investors to the Class of 2005 has negative rating implications.

Fitch said it views hedge funds and private equity firms as opportunistic, shorter-term investors. Thus, it said, long-term ownership remains a significant uncertainty as does the risk the companies will be managed with a short-to-medium-term business focus, mainly to support an initial public offering or other exit strategy.

With few exceptions, according to Fitch, obtaining management talent is a challenge for the new firms, especially in light of the comparatively large number of companies being formed in such a short period of time.

Fitch said underwriting talent is generally present among these reinsurers, at least in limited scope, and that without a proven level of underwriting expertise the reinsurers would not have been able to raise their substantial amounts of capital.