S&P upgrades Lloyd's to “A+”

Standard & Poor's has upgraded Lloyd's to “A+”. The upgrade is due to “unstoppable momentum behind improving London Market business processes” and the successful completion of phase 1 of the Equitas transaction.

S&P raised its insurer financial strength rating on the Lloyd's insurance market to “A+” from “A”. At the same time, the rating agency raised its counterparty credit rating on The Society of Lloyd's to “A+” from “A”. The outlook is stable.

"The upgrade reflects the recent successful conclusion of phase 1 of the Equitas group's transaction with National Indemnity, progress with regard to phase 2, and the unstoppable momentum behind improving London Market business processes," said Standard & Poor's credit analyst Rob Jones.

In the Equitas transaction, National Indemnity will provide up to £3.8bn ($7bn) of reinsurance for the Equitas group's (Equitas) loss reserves, rendering the likelihood of a future Equitas deficit and any related contribution from Lloyd's remote. Phase 1 involves a £3.1bn reinsurance, and phase 2 involves a novation of liabilities from Lloyd's members to Equitas and the provision of a further £0.7bn of reinsurance.

The ratings reflect Lloyd's strong competitive position, strong operating performance, strong capitalisation, and strong financial flexibility. These positive factors are partly offset, however, by relatively high reinsurance reliance and continuing operating performance volatility. The consistency and effectiveness of strengthened catastrophe risk controls are also yet to be tested.