AM Best highlights Lloyd’s combined ratio improvement in recent valuation

AM Best’s recent assessment of Lloyd’s operating performance underscores the ratings agency’s expectation that Lloyd’s will deliver strong technical performance over the underwriting cycle and that capital will continue to be attracted to the market.

Analysts noted that improved pricing conditions, along with strong performance monitoring by the company, began to materialize in major improvements in underwriting performance, which was clearly demonstrated by the end-of-year combined ratio. 2021 Lloyd’s year of 93.5%.

AM Best has affirmed the financial strength rating of A (Excellent) and long-term issued credit ratings of “a+” (Excellent) from Lloyds (UK), Lloyd’s Insurance Company (China) Limited (Lloyd’s China) ( China) and Lloyd’s Insurance Company SA (Lloyd’s Europe) (Belgium).

At the same time, the rating agency also affirmed the Society of Lloyd’s (the Company) (UK) long-term ICR of “a” (Excellent) and long-term credit ratings of ” a-” (Excellent) on the £500 million subordinated loans at 4.750% maturing on October 30, 2024 and on the £300 million subordinated loans at 4.875% maturing on February 7, 2047.

The outlook for these credit ratings is stable.

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AM Best noted that the ratings reflect the strength of Lloyd’s balance sheet, which it assesses as very strong, as well as its strong operational performance, business profile and appropriate management of business risks.

Overall, the Lloyd’s market enjoys the highest level of risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR).

AM Best’s assessment of the strength of Lloyd’s balance sheet takes into account the fungibility constraints of capital held at member level and the good financial flexibility of the market, reinforced by the diversity of its capital providers.

However, analysts said the market’s exposure to catastrophe risk is an offsetting factor. However, the requirement for members to replenish their funds with Lloyd’s to meet their underwriting commitments, as part of the “compliance” process, together with the Company’s enhanced monitoring of risk build-up, partially mitigate the potential volatility of risk-adjusted capitalization. due to operating losses.

In addition, analysts noted that the business profile assessment reflects Lloyd’s strong position in its core markets as a leader in reinsurance and specialist property and casualty insurance. Analysts pointed out that Lloyd’s had an excellent brand in these markets.

Meanwhile, Jefferies recently offered its view on Lloyd’s, noting that the price environment remains positive, despite the catastrophic losses.

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Sallie R. Loera