Best To Provide Ratings on Individual Lloyd’s Syndicates

Insurance industry analyst A.M. Best Co. announced that it will begin compiling financial data on individual Lloyd’s syndicates, and will accord higher ratings than Lloyd’s overall market strength to qualifying groups.

“The rating assigned to the Lloyd’s market (currently ‘A’, Excellent) will continue to be assigned,” said the announcement. “However, A.M. best believes that a select number of Lloyd’s syndicates are able to offer policyholders security above that of the market rating. Accordingly, while the market rating will remain the floor of security behind all policies underwritten by Lloyd’s syndicates, some syndicates have the potential of being assigned a higher rating.”

The change marks the industry’s recognition that corporate capital now backs 85 percent of Lloyd’s syndicates, and that large companies and brokers, many of whom have financial strength ratings superior to Lloyd’s, now control most of its syndicates.

Best will use two main criteria in determining ratings: 1) Whether a syndicate has an operating performance record that is superior to “that of the market overall and consistent with the A+ or A++ rating level;” and 2) Whether a “syndicate is backed by a highly rated (A= or A++) capital provider.” In either case Best would consider rating the syndicate at the higher level.

Best’s initiative coincides with a similar decision by Standard & Poor’s announced last year. The company stressed that it will only investigate syndicates and assign ratings on a voluntary basis, i.e. the insuring syndicate must make a specific request and submit complete financial information. It plans to meet with a number of Managing Agents “over the coming weeks to discuss this initiative in more detail.”