Fitch has upgraded Lloyd’s insurer financial strength rating to AA- from A+, with a stable outlook.

The agency expects Lloyd’s underwriting performance to improve, with oversight by the market’s Performance Management Directorate (PMD) playing a key role in reducing earnings volatility.

Business plan reviews and syndicate benchmarking have helped to improve pricing, reserving, claims management, risk-adjusted capital setting and catastrophe modelling.

“Work undertaken by the PMD has provided Fitch with increased confidence that, on an aggregate basis, prior underwriting years will continue to develop favourably across the rating horizon.”

Fitch considers a possible deterioration in technical profits to be the greatest risk to earnings.

Lloyd’s faces headwinds including a low-yield investment environment and softening insurance prices.

The market says the upgrade is “down to significant improvements in… underwriting discipline, financial strength and risk management”.

Fitch has also upgraded its insurer financial strength rating on Lloyd’s Insurance Company (China) to AA- from A+. The Society of Lloyd’s long-term issuer default rating moves to A+ from A.