The world’s oldest insurance and reinsurance marketplace, Lloyd’s, has had its financial strength rating (FSR) upgraded to A+ (superior) from A (excellent) by AM Best, as Chief Financial Officer (CFO) Burkhard Keese confirms the early renewal of the central fund insurance in 2024.
Additionally, ratings agency AM Best has revised the Lloyd’s long term issuer credit rating to ‘AA-’ (superior) with a stable outlook from ‘A+’ (excellent) with a positive outlook.
AM Best states that the new ratings reflect the market’s very strong balance sheet strength, its strong operating performance, very favourable business profile, and appropriate enterprise risk management.
“The upgrading of the ratings reflects the Lloyd’s market’s excellent position in the global general insurance and reinsurance markets as a leading writer of specialty property/casualty risks, together with its strengthened balance sheet fundamentals and proven risk management capabilities,” says AM Best.
The fact the market is expanding, continues the ratings agency, shows its ability to attract and retain investors due to what the firm’s describes as a unique business proposition that offers a capital efficient structure and the ability to write business globally.
“Today’s upgrade from AM Best follows that of S&P Global at the end of last year, with both agencies acknowledging the strength and resilience of Lloyd’s balance sheet, its strong operating performance and its leading position as the global specialty insurance and reinsurance market,” said CFO Keese.
S&P revised its financial strength rating to ‘AA–’; outlook stable, from ‘A+’; outlook stable for the Lloyd’s market in mid-December, highlighting its improved balance sheet strength and very strong capital and solvency positions.
“Capital management continues to be Lloyd’s focus to ensure the attractiveness of the Lloyd’s market for our customers, participants and investors. Our financial strength and solid capital platform enable us to deliver on our strategic growth ambitions and explore new and innovative solutions to enhance the fungibility of capital for our members. We were able to renew the central fund insurance early this year and are currently exploring a post major market loss contingent capital solution for eligible members,” added Keese.
The Central Fund Insurance was first placed in 2021 and is a multi-layered insurance cover designed to reimburse the Central Fund following aggregate losses of above $1 billion. This multi-year protection, which is underwritten by a panel of the world’s largest reinsurers and a risk transformation company financed by a leading investment bank, has now been renewed.
According to Lloyd’s, the cover enhances the financial strength of its balance sheet from severe loss events with a remote probability of occurrence.
Although the insurance is a five year contract, Lloyd’s notes that the recent renewal demonstrates that it can be considered as a longer-term solution.
