Lloyd’s achieves improved debt rating from S&P Global

The issue-level rating on the subordinated Tier 2 notes of Lloyd’s has been raised by S&P Global Ratings from ‘BBB+’ to ‘A-‘.

“Lloyd’s market-wide regulatory solvency ratio and central solvency ratio remained stable over 2022, despite significant reserving for the Russia-Ukraine conflict and Hurricane Ian, rising interest rates, and investments in private assets through its newly launched investment platform,” noted the rating agency in an announcement emailed to Insurance Business over the weekend.

“Lloyd’s holds comfortable capital surpluses in both its half-year 2022 market-wide regulatory solvency ratio of 179% (year-end 2021 177%) and central solvency ratio of 395% (year-end 2021 388%). We expect both market-wide and central solvency ratios to remain robust even in extreme stress scenarios, such as catastrophic events, or if the current inflationary environment continues in 2023 and 2024.”

Meanwhile S&P Global is forecasting a combined ratio of about 95% at year-end 2022 for Lloyd’s, taking into account the half-year combined ratio of 91.4% and reserving £1.1 billion and £2.2 billion, respectively, for the Russia-Ukraine war and Hurricane Ian. It expects a combined ratio of nearly 95% for 2023.

“We note that Lloyd’s significant exposure to natural catastrophe risk, the challenging macroeconomic environment due to rising inflation, and uncertainty around the Russia-Ukraine conflict provide the potential for volatility in the level of its solvency cover,” said S&P Global.

“However, this is offset by the stability in the solvency ratio maintained in 2022, better operating performance expectations, and ability to recapitalise when needed. The latter was demonstrated in 2017 when the market injected £3 billion following Hurricanes Harvey, Irma, and Maria; and in 2020, when it injected a further £3.5 billion following COVID-19-related losses.”