S&P Affirms Lloyd’s A+ Rating

September 19, 2000

Despite expected losses from 1997 through this year, Standard & Poor’s reaffirmed the Lloyd’s insurance market’s A+ insurer financial strength rating.

S&P cited Lloyd’s “very strong business position” as one of the prime factors in setting the rating. “Lloyd’s has the capacity to write up to GBP 10 billion ($14 billion) of gross premiums for 2000. Its business is well diversified by class, type and territory. It has one of the strongest brands and license networks in global insurance and reinsurance. Despite current losses, the market continues to attract new participants. s a consequence, Lloyd’s is well-positioned to benefit from the improved trading conditions expected for 2001,” said the announcement.

S&P considers the expected £1.2 billion ($1.68 billion) loss estimate for 1998 and the £1.4 billion ($1.96 billion) projection for 1999 to be significant, but it expects better results in 2000 and in subsequent years. While recognizing that “the levels of return are weak for the market as a whole,” S&P anticipates that “the better performing syndicates (and therefore those expected to continue in existence) will make significantly better returns throughout the period.”

Other factors which contributed to the reaffirmation of the A+ Rating included Lloyd’s “very strong and independently minded” regulatory management; “very strong capitalization”; the expected growth of corporate capital to 85 percent of capacity by 2001; the continued attraction of “new capital providers to the market;” and the more efficient and competitive practices anticipated from Lloyd’s cooperation with the International Underwriting Association (IUA) to simplify access to the London market and standardize procedures.

S&P also concluded that “Outstanding litigation against Lloyd’s [presumably the Jaffray case] will not have a material impact on the business position nor the capital adequacy of Lloyd’s; and no significant deterioration in the surplus of Equitas is expected during the next few years.

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