Rating agency A.M. Best today reaffirmed Lloyd’s rating of A (Excellent), expressing greater confidence in the insurance market’s ability to manage the softening cycle – mentioning several business reforms – and citing a less volatile anticipated operating performance.
Luke Savage, Director, Finance, Risk Management & Operations at Lloyd’s, said: "We are delighted that A.M Best has reaffirmed our ratings, recognised the key benefits of Lloyd's, our ongoing work to maintain underwriting discipline and the attractiveness of the market."
A.M. Best recognised a number of factors which contributed to the rating affirmations. These included:
- enhanced corporate governance and analysis now making it easier to identify emerging issues early, helping to reduce market volatility;
- Lloyd’s international expansion, particularly Singapore and China, reducing the cost of placing business, enhancing profile and reducing the dependence on a single underwriting location;
- a diminished strain on the Central Fund due to stabilising reserves and the closure of a significant number of Open Years; and
- the rigorous review that applicants face is likely to prevent new insolvent members from emerging.
The Franchise Performance Directorate and Risk Management stood out for praise, with analysts outlining material changes in oversight and risk management procedures that are likely to prevent poor performance in a soft cycle. A.M. Best recognised that this has yet to be tested.
A.M Best agreed with Lloyd’s that subprime related losses arising from underwriting or investments are unlikely to have a material impact on Lloyd’s performance, although they were aware that claims could be coming through for some time.
Analysts believed that underwriting discipline would remain strong in 2008 and in to 2009, while citing Lloyd’s ‘excellent’ business profile as enabling it to keep ahead of the competition in lower tax centres in terms of attracting and retaining business.
