A.M. Best announced that it has affirmed the financial strength rating of A- (Excellent) of the Lloyd’s market with a stable outlook.
“The affirmation reflects Lloyd’s excellent business profile, excellent capitalisation and high standards of regulation,” said the bulletin. It also noted “the market’s weak financial performance, uncertainty caused by the sheer magnitude of losses Lloyd’s is facing, certain issues arising from its Chairman’s Strategy Group proposals and long-term uncertainty over the ultimate adequacy of Equitas’ reserves,” as offsetting factors.
Best noted the efforts Lloyd’s has made to shore up its capital base, indicating that, “Funds supporting underwriting at year-end 2001 increased 17.5% on year-end 2000 to GBP 21.8 billion (USD 31.8 billion).” The announcement also pointed out that “Lloyd’s has taken steps to rebuild the Central Fund in the wake of the World Trade Center (WTC) loss by increasing the premium levy from 1.1% to 2% and paying the funds generated into the Central Fund in 2002 and 2003.”
Concerning the ongoing debate over proposals to make a number of fundamental reforms in the Lloyd’s market, including the move to eliminate individual “Names” and to implement a “franchise” type of system, Best commented that the “Chairman’s Strategy Group (CSG) may have compromised its original objective to increase the simplicity of the market for capital providers. The CSG franchise proposals are recognised as a constructive blueprint for the future direction of the market, although A.M. Best believes that practical implementation of the proposal to manage the market from a commercial perspective will be a significant challenge.”
The proposal are set to be voted on by Lloyd’s members at a special meeting in London on September 12. A majority of Lloyd’s 13,000 plus membership must vote in favor of the proposal in order for them to be adopted.
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