Moody’s Report Discusses Effect of Decreasing Number of Lloyd’s Syndicates

March 28, 2002

A report by Moody’s Investors Service discusses the long term effects of the dwindling number of Lloyd’s syndicates, and concludes that, although the trend marks a decline in Lloyd’s market share, it will have only a limited impact on the performance of the remaining syndicates.

Lloyd’s has seen a number of syndicates merge, or cease operations altogether. “In 1999 there were 139 syndicates,” said Lloyd’s media representative Sara Chorley. “Last year there were 108, and there are presently 86.” The Sept. 11 attacks accelerated the trend.

Chorley noted that the remaining syndicates were “bigger and stronger,” which indicates that the trend actually increases Lloyd’s financial strength. Moody’s report recognizes this as well, and predicts further consolidation in the future. It eventually sees as few as 40 to 50 syndicates operating at Lloyd’s.

In the opinion of Moody’s analyst Robert Smith, who authored the report, Lloyd’s reduced market share is not of great significance. Far more important is the need to adhere to strict underwriting standards and maintain a sound financial condition. The effects of Sept. 11, and the possibility of a future catastrophic loss event are still the biggest threat to the Lloyd’s market.

Moody’s report also indicated doubts about the ultimate commitment of Lloyd’s corporate capital providers, noting that insurance companies account for 45 percent of capacity. Ultimately they do not need to do business through Lloyd’s, Moody’s observed, and the withdrawal of a significant portion of their capital would have a negative impact on Lloyd’s.

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