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News: Lloyd's gets an A+ from S&P
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Lloyd's today received a further endorsement from Standard and Poor's, which has reaffirmed its A+ rating with stable outlook of the insurance market.
The rating agency highlights Lloyd's record 2009 operating performance, healthy capitalisation and good financial flexibility as underpinning its strong rating and added that its Enterprise Risk Management assessment has improved to Adequate with Strong Risk Controls.
S&P cites a number of attributes for the Lloyd's market that justify its rating, including its good competitive position supported by its unique brand that is recognised across the world and which has engendered strong customer loyalty, among others.
Lloyd's attractiveness as a place to do business was demonstrated by the continual flow of new entrants into the market in recent years and it has worked hard to improve its systems and processes to ensure it is the first-choice platform for many players, S&P says.
The rating agency also pays tribute to the market's financial strength along with its varied business profile. Lloyd's capitalization is strong, supported by what we consider to be very strong capital adequacy, strong quality of capital, Lloyd's much diminished exposure to legacy issues, and the efficacy of the capital-setting processes, S&P states in its report. The diversity of Lloyd's capital providers represents a unique strength for the market, it adds.
Lloyd's central assets of £2.8 billion at the end of 2009 are £1 billion more than its minimum solvency target, S&P notes, but adds it does not expect Lloyd's to reduce the amount of the Central Fund or contributions to it in the short term.
We are very pleased that S&P has chosen to reaffirm Lloyd's A+ rating, which is testament to the market's unique strengths, Luke Savage, Lloyd's Director of Finance, Risk Management and Operations, tells lloyds.com. The market's focus on maintaining high standards of underwriting discipline and risk management has helped Lloyd's to successfully navigate a clear path through unprecedented turbulence in the financial markets and a weakening insurance cycle.
Challenges and opportunities
But industry trends of continuing rating pressure, catastrophe losses and lower investment returns will test the market's operating performance over the coming years, S&P says. In S&P's opinion, Lloyd's is expected to bear a large share of claims from the Chilean earthquake as well as being impacted by losses arising from the Deepwater Horizon oilrig disaster.
Lloyd's also faces challenges from the new Solvency II capital rules due to be introduced in Europe in 2013, S&P states, although it also notes Lloyd's is working hard to develop its own internal capital model that would significantly lower the market's capital requirements than if it were to use the standard formula.
All in all, the future presents some challenges to Lloyd's, but the market is well placed to deal with them, the rating agency concludes.
First Published 09/09/10 - For more on this, visit:
Posted on Tuesday, 02 Nov 2010
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