A.M. Best has affirmed the financial strength rating of “A (Excellent)” and the issuer credit ratings (ICR) of “a+” of Lloyd’s and Lloyd’s Insurance Company.
The rating agency has also affirmed the ratings on various capital deals.
The outlook for all ratings remains positive. It reflects Lloyd’s strong operating performance in recent years, in spite of the exceptional record of natural catastrophes in 2010 and 2011, with A.M. Best’s assessment of the robust oversight of the market by Lloyd’s and its success in reducing earning volatility.
The outlook also recognises the steady improvement in the market’s risk-adjusted capitalisation, which is expected to remain strong in 2015 and into 2016.
In addition, Lloyd’s risk-based approach to setting member level capital, as well, as its monitoring of syndicates’ performance and catastrophe exposure, reduces the risk of material drawdowns on the central funds.
When setting the member level capital requirement, Lloyd’s applies a 35 percent economic capital uplift to each syndicate’s solvency capital requirement. This level of uplift has been retained for 2015, but should it change in the near future, A.M. Best will review the implications for risk-adjusted capitalisation and react accordingly.
Offsetting these positive rating factors are the ongoing challenges to Lloyd’s competitive position. Lloyd’s benefits from an excellent position in the global insurance and reinsurance markets, according to A.M. Best.
But a traditional and alternative capacity is creating difficult trading conditions in Lloyd’s core markets, particularly for reinsurance business.
In addition, the growth of regional reinsurance hubs, combined with the comparatively high cost of placing business at Lloyd’s, is reducing the flow of business into the London market.
