A.M. Best Comments on Restructuring Announcement of Flagstone Reassurance Suisse S.A.

A.M. Best Co. has commented that the financial strength rating of A- (Excellent) and the issuer credit ratings (ICR) of "a-” of Flagstone Reassurance Suisse S.A. (Martigny, Switzerland), Island Heritage Insurance Company Ltd. (Cayman Islands) and Flagstone Alliance Insurance and Reinsurance PLC (Limassol, Cyprus) as well as the ICR of "bbb-” of Flagstone Reinsurance Holdings S.A. (Luxembourg) (NYSE: FSR) (referred to as Flagstone Re) are unchanged following its recent restructuring announcement.

Also, unaffected by these recent developments are the indicative debt ratings of "bb” on preferred stock, "bb+” on subordinated debt and "bbb-” on senior debt for securities available under the shelf registration of Flagstone Reinsurance Holdings S.A. The outlook for all ratings remains negative.

On October 24, 2011, Flagstone Re announced that it would restructure the organization in an effort to focus on its core operations. While this is a significant shift away from the company’s previous strategy of diversification, the streamlined structure is anticipated to result in overall efficiencies throughout the organization. Additionally, the new structure will allow the company to reduce its global risk profile and refocus on its core underwriting strategies. A.M. Best will continue to monitor Flagstone Re as the company moves through the phases of restructuring as well as its ongoing efforts to improve on its risk-adjusted capitalization.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies”; "Natural Catastrophe Stress Test”; "Understanding Universal BCAR”; "Rating Members of Insurance Groups”; and "A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology.

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