A.M. Best announced that it has affirmed Lloyd’s “A- (Excellent) rating and has removed the “under review” status of its rating, which it applied shortly after the September 11 attacks.
Best indicated that, “The rating has been affirmed because capital supporting underwriting in 2002 will increase, A.M. Best believes the impact of WTC on the Central Fund is containable, there is some stability in Lloyd’s estimate of the market’s gross loss, USD 2 billion has successfully been transferred to Lloyd’s trust funds in the United States and A.M. Best believes that the market’s WTC reinsurance recoveries will be widely spread among high quality reinsurers. Offsetting factors include the absolute size of Lloyd’s WTC loss and some uncertainty over future development of the loss, the market’s dependence on a high level of reinsurance recoveries and poor open year performance.”
The rating agency was particularly positive concerning Lloyd’s increased capacity, which will top $17 billion in 2002 (See IJ Website, Dec. 13) It noted that this will not only enable the Lloyd’s market to participate in increased underwriting activities, but also “means that support will continue for the market’s existing structure, including the Central Fund.”
Best’s report also noted with approval other initiatives Lloyd’s has taken to strengthen the Central Fund, including increasing its levy on premiums to 2 percent and requiring an annual contribution from its syndicates of 1 percent. Best also expressed confidence that Lloyd’s, which recently transferred around $2 billion to its U.S. reinsurance trust fund, would be able to pay for losses connected with the events of Sept. 11, and would receive substantial reinsurance recoveries.
A.M. Best noted, however that it anticipated that Lloyd’s losses for the years 1999-2001 are likely to exceed capacity by 10 percent, with 1999 closer to 20 percent, but expressed confidence that “Lloyd’s is likely to trade successfully through the recent period of losses, including the WTC loss in September.”
The report concludes that Lloyd’s “will be in a strong position to take advantage of the favourable pricing environment that is anticipated for 2002 and the market will produce a healthy return on capital employed for the year, assuming normal loss experience.”
Topics Excess Surplus Reinsurance AM Best Lloyd's
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