Flagstone Re Announces Purchase of Retrocessional Coverage from Montana Re Cat Bond

HAMILTON, Bermuda - 30 November, 2009 - Flagstone Reinsurance Holdings Limited (NYSE:FSR) announced today that Flagstone Réassurance Suisse SA, has purchased three years of fully collateralized retrocessional coverage from Montana Re Ltd. ("Montana Re"), a special purpose reinsurer established in the Cayman Islands.  Montana Re was formed as a program structure enabling further issuance of additional series of notes in the future.

Montana Re offers Flagstone protection on its reinsurance portfolio through two separate tranches, utilizing a PCS index trigger with state and peril-specific personal and commercial payout factors.  Montana Re has issued USD $100 million of Series 2009 - 1, Class A Principal-at-Risk Variable Rate Notes due December 7, 2012 and USD $75 million of Series 2009-1, Class B Principal-at-Risk Variable Rate Notes due December 7, 2012 to collateralize its obligations under the retrocession agreements.  Risk analysis for the transaction was performed by Risk Management Solutions, Inc. ("RMS").  David Brown, Flagstone CEO, commented:  "We are very pleased with the outcome of this transaction.  Access to the capital markets in transactions such as this helps us to optimize returns for our owners and enhance security for our clients.  The multi-year nature of the coverage allows us certainty in an important aspect of our business plan over the coming years."

Mark Byrne, Flagstone's Chairman, added "The cat bond marketplace has been challenged to find index-based trigger structures acceptable to the credit rating agencies for capital relief, and also to find collateral structures which provide acceptable LIBOR returns while overcoming limitations of earlier deals. Montana Re's design is at the innovative end of the market in both respects."        

Peter Nakada, Managing Director of RMS Risk Markets commented: "This transaction was one of the most efficient transactions we have worked on to date, thanks to the combined modeling expertise of Flagstone Re and the RMS team.   We look forward to working with Flagstone on similar transactions in the future."

About Flagstone Reinsurance Holdings Limited

Flagstone Reinsurance Holdings Limited, through its operating subsidiaries, is a global reinsurance and insurance company that employs a focused and technical approach to the Property Catastrophe, Property, and Specialty reinsurance and insurance businesses. Flagstone Réassurance Suisse has received "A-" financial strength ratings from both A.M. Best and Fitch Ratings, and "A3" ratings from Moody's Investors Service.  Island Heritage and Flagstone Reinsurance Africa have received "A-" financial strength ratings from A.M. Best.

About RMS

Risk Management Solutions is the world's leading provider of products and services for catastrophe risk management. More than 400 leading insurers, reinsurers, trading companies, and other financial institutions rely on RMS models to quantify, manage, and transfer risk. Founded at Stanford University in 1988, RMS serves clients today from offices in the U.S., Bermuda, the U.K., France, Switzerland, India, China, and Japan. For more information, visit our website at www.rms.com.

Flagstone is traded on the New York Stock Exchange under the symbol "FSR" and the Bermuda Stock Exchange under the symbol "FSR.BH". Additional financial information and other items of interest are available at the Company's website located at www.flagstonere.com.

Contact:
Flagstone Reinsurance Holdings Limited, Hamilton
Brenton Slade, +1-441-278-4303