AM Best has affirmed the credit ratings of Lloyd’s, reasoning that improving market conditions and robust remedial actions will support improvements in performance over the next few years.
Analysts maintained the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of ‘a+’ of Lloyd’s (United Kingdom), Lloyd’s Insurance Company (China) Limited (Lloyd’s China) (China) and Lloyd’s Insurance Company S.A. (Lloyd’s Brussels) (Belgium).
AM Best explained that the ratings reflect Lloyd’s balance sheet strength, which is categorised as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management.
The market’s exposure to catastrophe risk is an offsetting rating factor, but this volatility is mitigated by the requirement that member replenish their funds at Lloyd’s to meet their current underwriting liabilities.
AM Best’s operating performance assessment reflects the expectation that Lloyd’s will produce strong technical performance over the underwriting cycle and that capital will continue to be attracted to the market.
That said, since 2017 the market has experienced higher-than-average catastrophe losses and lower favourable prior-year reserve releases, and recent technical performance has been outside expectations for the strong assessment.
However, the rating agency expects that market conditions and actions by the Corporation of Lloyd’s and individual managing agents will support further incremental improvements in the attritional accident-year performance over the coming three years.
Actions are also being taken through the Future at Lloyd’s initiative to reduce the cost of placing business at Lloyd’s, the benefits of which should start to be realised over the short-term.
Analysts added that the ratings of Lloyd’s China and Lloyd’s Brussels reflect reinsurance support from Lloyd’s in the form of quota share contracts between Lloyd’s and the syndicates participating on the China and Brussels platforms.
