Best Affirms Lloyd’s Syndicate 958 ‘A’ Rating

A.M. Best Co. announced that it has affirmed its Syndicate Rating of “A” (Excellent) and the issuer credit rating of “a+” of Lloyd’s Syndicate 958, which is managed by Omega Underwriting Agents Limited (OUAL). The outlook for both ratings is stable.

“The ratings reflect syndicate 958’s excellent prospective underwriting performance and strong profile in certain specialist markets as well as the financial strength of the Lloyd’s market—currently rated ‘A’ (Excellent)—which underpins the security of all Lloyd’s syndicates,” said the announcement. “A partially offsetting factor is the pricing pressure that is likely to develop in 2005 and 2006 for the lines written by syndicate 958. The rating is based on A.M. Best’s specific syndicate criteria. (See A.M. Best’s Rating Methodology for Lloyd’s Syndicates at http://europe.ambest.com/lloydsmethodology.pdf).”

Best made the following observations on the Syndicates ratings:

A.M. Best believes that syndicate 958’s strict underwriting approach, conservative reserving policy and cautious approach to reinsurance are likely to lead to a continuation of its excellent long-term performance record. A profit of approximately 13 percent of capacity is anticipated for both the 2002 and 2003 open years, in line with syndicate 958’s latest forecasts (Quarterly Monitoring Return at September 2004).

In 2004, catastrophes in the second half of the year are expected to have only a marginal impact on the syndicate, although A.M. Best forecasts a somewhat lower profit than anticipated for the previous two years. A.M. Best believes that the syndicate is likely to continue the conservative reserving practices that have led to prior year reserve releases in each of the last five closed years. An increasingly competitive environment is likely to put pressure on rates and terms in 2005 and 2006 for many of the classes written by syndicate 958. However, the syndicate is expected to scale back on underwriting once conditions deteriorate as evidenced by action taken in the last down cycle. Capacity increased by almost 50 percent to GBP 225 million (USD 436 million) for the 2004 year of account but will remain unchanged for 2005.

Syndicate 958 has an excellent business position, writing a low volatility and well diversified property account, mainly emanating from the US (more than 50% of gross premiums anticipated in 2005). However, A.M. Best believes the syndicate is likely to be successful in its plans to develop similar property business from continental Europe (over 20% of gross premiums anticipated in 2005). The split in gross premiums in 2004 between direct insurance and reinsurance is likely to be approximately 60:40, and this split is unlikely to change significantly in 2005.