September 20th, 2012

Lloyd’s: Market Ratings

Posted at 1:00 AM ET

Matthew Day, Senior Vice President

The financial strength ratings assigned to Lloyd’s by S&P, A.M. Best and Fitch have been relatively stable in the 15 years since the first rating was assigned. During this period, the (re)insurance industry and Lloyd’s itself have undergone dramatic change as they responded to the major challenges of the September 11, 2001, terrorist attacks, devastating US and Gulf of Mexico hurricanes and other natural catastrophes that occurred across the globe. The softening casualty insurance market and the global financial crisis also caused difficulties during this time. The current Lloyd’s ratings assigned by each rating agency are at their original levels - a significant achievement given that most of Lloyd’s peers have failed to recover their pre-2001 ratings.

Standard & Poor’s

S&P’s “A+” financial strength rating was initially assigned in October 1997, and was downgraded by one notch to “A” in the wake of the September 11, 2001, terrorist attacks. S&P subsequently returned Lloyd’s to “A+” in 2007. The 2011 rating update, which carries a stable outlook, reflects Lloyd’s strong competitive position, operating performance, capitalization and financial flexibility. These positive factors are partly offset by relatively high utilization of reinsurance and letters of credit for capital support and inherent operating performance volatility. S&P also points out that Lloyd’s robust enterprise risk management framework supports its overall rating.

A.M. Best

A.M. Best’s “A” financial strength rating, initially assigned in October 1997, was downgraded by one notch to “A-” following the September 11, 2001, terrorist attacks. It was subsequently returned to “A” in August 2004, reflecting Lloyd’s strong operating performance and improvements in risk management and prospective apitalization. The rating was most recently affirmed with a stable outlook in August 2011, when A.M. Best commented that the rating reflects Lloyd’s strong capitalization, good financial flexibility, catastrophe-affected operating performance and excellent global business profile.

Fitch Ratings

Fitch has rated the Lloyd’s Market on an interactive basis since the first debt issue in September 2004. In March 2007, the agency upgraded its Lloyd’s Insurer Financial Strength rating by one notch to “A+” with a stable outlook. In its August 2011 report, Fitch highlighted Lloyd’s resilience of earnings, the Performance Management Directorate’s market oversight, its significant financial flexibility and strong capitalization.

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