Lloyd’s Affirmed

S&P’s affirmed its “A” long-term insurer financial strength rating on U.K.-based Lloyd’s insurance market. The “continuing commitment of capital providers to the Market and the consequent increase in capacity and funds at Lloyd’s for 2003,” were factors in the ratings action, according to S&P’s. Also affecting the affirmation was the expectation that Lloyd’s will have a “very strong operating performance for the 2002 and 2003 years of account.”

These factors are partly offset by Lloyd’s reduced but recovering capital adequacy as a result of open-year losses; the further progress required with the implementation of structural reforms to maintain the Market’s competitive position; poor returns experienced by many capital providers prior to 2002; the vulnerability of the market to reinsurer failure; and the market’s continuing contingent exposure to Equitas Ltd.

Continuation of the rating at its current level depends upon a number of expectations being met. Capacity is expected to remain stable or increase slightly during 2003. It is expected that there will be further selective reductions in capacity by some members, but no significant withdrawals over the next few years. Operating performance in 2003 is ex-pected to be at least similar if not better than 2002. Further rate increases are expected during 2003, and rates in most lines of
business are expected to be maintained during the 2003-2004 renewals.