AM Best has announced a positive revision in the outlooks and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent) for Lloyd’s, its subsidiaries, and Society of Lloyd’s.
The positive outlooks come as a result of actions taken to bolster Lloyd’s balance sheet strength, which AM Best has assessed as very strong.
The introduction of Lloyd’s Central Fund insurance, an increase in the callable layer, and measures to curb excessive risk-taking by individual syndicates have contributed to enhancing the resilience of Lloyd’s balance sheet.
Overcoming challenges posed by the COVID-19 pandemic, heightened catastrophe activity, and the conflict in Ukraine, Lloyd’s has demonstrated its ability to consistently re-capitalise and grow capital year-over-year through its “coming into line” (CIL) process.
AM Best expects Lloyd’s to continue its strong operating performance over the underwriting cycle and effectively execute its modernisation strategy.
Burkhard Keese, Chief Financial Officer, Lloyd’s commented, “I am pleased to see AM Best recognise the improvement in Lloyd’s underwriting performance and the quality, strength and stability of our balance sheet.”
The Lloyd’s market benefits from robust risk-adjusted capitalisation, supported by a strong risk-based approach to setting member-level capital and the availability of Lloyd’s Central Fund to meet policyholder obligations. The recent purchase of Central Fund insurance by the Corporation of Lloyd’s further enhances capital management.
Despite the market’s exposure to catastrophe risk, the requirement for members to replenish their Funds at Lloyd’s and the Corporation’s improved oversight of accumulation risk help mitigate potential volatility in risk-adjusted capitalisation due to operating losses.
AM Best anticipates strong technical performance by Lloyd’s over the underwriting cycle, with improving pricing conditions and effective performance oversight by the Corporation.
While Lloyd’s expense ratio has reduced, actions under the Future at Lloyd’s initiative are underway to further reduce the cost of placing business at Lloyd’s.
Lloyd’s holds a strong position in core markets as a leading writer of reinsurance and specialist property/casualty insurance, benefiting from an excellent brand reputation and experiencing robust pricing conditions.
The market maintains a well-diversified business mix with a bias towards North America geographically and moderate-to-high-risk commercial specialty lines.
