Lloyd’s is in a good position to perform well as the business benefits from strong pricing conditions and also from measures undertaken in the last several years to improve its operations, AM Best says in a credit rating update. 

AM Best has subsequently revised its outlook of Lloyd’s UK to positive from stable, affirmed its financial strength rating of A (Excellent) and long-term issuer credit rating of a+. 

The rating agency also applied the same revisions to Lloyd’s Insurance Company (China) and Lloyd’s Insurance Company S.A. (Lloyd’s Europe) (Belgium). 

“These ratings reflect Lloyd’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management,” the rating agency said.

“The positive outlooks reflect, in part, actions taken over a number of years to improve the resilience of Lloyd’s balance sheet.” 

AM Best says the actions include the introduction of the Lloyd’s Central Fund insurance, increase in the callable layer and limits put in place to reduce excessive risk taking by individual syndicates. 

Lloyd’s has also demonstrated its ability to “consistently re-capitalise and grow capital year-over-year” following a series of challenging years caused by the pandemic, elevated catastrophe activity and the conflict in Ukraine, says AM Best. 

“AM Best expects Lloyd’s to continue delivering a strong operating performance over the underwriting cycle, as well as successfully execute its modernisation strategy.” 

While the business’s exposure to catastrophe risk is an offsetting factor, AM Best says the requirement for members to replenish their funds at Lloyd’s to meet their underwriting liabilities “partly mitigates the potential for volatility in risk-adjusted capitalisation due to operating losses”. 

“The business profile assessment reflects the strong position of Lloyd’s in its core markets, as a leading writer of reinsurance and specialist property/casualty insurance,” says AM Best. 

“Lloyd’s has an excellent brand in these markets, which are experiencing strong pricing conditions.” 

AM Best says Lloyd’s will produce strong technical performance over the underwriting cycle and that capital will continue to be attracted to the market.