AM Best has cut its outlook for Lloyd’s from positive to stable, while affirming its financial strength rating at A and issuer credit ratings at A plus.

“The rating affirmations reflect Lloyd’s strong and stable risk-adjusted capitalisation, excellent business profile and recent strong underwriting performance,” the ratings agency says.

“The revision of the outlooks to stable from positive reflects AM Best’s view that an upgrade of the ratings in the short term is unlikely, owing to pressure on Lloyd’s competitive position and prospective financial performance in an increasingly difficult operating environment.”

AM Best says Lloyd’s benefits from an excellent position in the global insurance and reinsurance markets. But the growth of other regional hubs, combined with the comparatively high cost of placing business at Lloyd’s, is reducing the flow of business to the London market.

It says Lloyd’s has been proactive in responding to the threats, with initiatives such as its Vision 2025 strategy and measures to improve efficiency and reduce operating costs.

“AM Best will continue to closely monitor Lloyd’s ability to defend its strong competitive position against the prevailing market headwinds.”