AM Best has released a detailed review of the Lloyd's market.
The agency cited the market's overall structure as being key to its competitive strength, fostering the development of strong specialist underwriting skills. It also commended the more commercial focus imposed by the Franchise Board and the minimum standards it set to help safeguard future profitability.
2005 a small increase in premium of just over £300m, reflecting some improvement in the reinsurance market, particularly in the final quarter following the major US hurricane losses. Losses had a similar, although not as marked, impact on the marine and energy markets.
Premium volume for all other major business lines declined, reflecting greater caution from underwriters as market conditions became less favourable, particularly in aviation business, driven by the marked softening that has taken place for this line of business.
The split in premium income by method of acceptance shows a significant increase in premium volume for reinsurance, largely offset by a decrease in Lloyd's direct underwriting. AM Best believes this reflects increasing demand for reinsurance, driven by the recent higher frequency and severity of major catastrophes.
The territorial scope of business written and Lloyd's worldwide market access remain positive rating factors. The US continues to be Lloyd's leading market, representing nearly 37% of gross premium income. The UK and continental Europe follow in importance to Lloyd's with 22% and 17% of 2005 gross premium income, respectively. AM Best anticipates that Lloyd's will focus on improving its access to certain key developing markets.
