Lloyd’s Syndicate Rating at ‘A-‘

A.M. Best Co. has affirmed the Best’s syndicate rating of “A-” of Lloyd’s syndicate 1243, which is managed by Euclidian Underwriting Limited, U.K. The outlook is stable.

The rating reflects the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates, in addition to the syndicate’s well diversified business position and strong prospective operating performance. Offsetting these positive factors are the risks arising from the continued significant expansion of underwriting activities, adverse reserve development and deterioration in forecast performance for the 1999 and 2000 years of account.

The capital adequacy of syndicate 1243 reflects that of the Lloyd’s market overall. Capital at Lloyd’s is determined using Lloyd’s risk-based capital system and includes an element of mutualization through the Central Fund. While A.M. Best regards the involvement of Centre Solutions (Bermuda) Limited as a positive factor for syndicate 1243 in that it is a stable and professional source of capital, the syndicate’s rating does not reflect additional explicit support from the Centre group.

The syndicate is now less dependent upon certain specific U.K. domestic market niches, particularly its affinity schemes business. As the account has expanded, the syndicate has evolved into a more broadly based insurer, writing a range of the business lines traditionally written at Lloyd’s. Incorporating planned growth for 2002, the compound annual increase in gross premium is almost 80 percent since the syndicate began trading in 1998. A.M. Best believes that the rapid early expansion of syndicate 1243 carries an additional element of risk, although the management controls that Euclidian has in place are believed to be adequate.

A.M. Best expects a strong level of profitability in 2002 and 2003, reflecting the prevailing excellent business environment. Although the syndicate forecasts losses of 11.5 percent and 2.8 percent for the 2000 and 2001 open years, losses at this level will be lower than A.M. Best expects for the market as a whole. The syndicate’s forecasts incorporate a World Trade Center loss equivalent to 7 percent of 2001 stamp capacity.

The syndicate’s forecast performance has not met A.M. Best’s expectations. The reported closed year loss for 1999 of 8.1 percent deteriorated from a third quarter 2001 syndicate quarterly return (SQR) forecast loss of 3.5 percent, and there has also been deterioration in the forecast loss for the 2000 open year.

Topics Excess Surplus AM Best Lloyd's