S&P Global Ratings upgraded the issue level rating on Lloyd’s Tier 2 subordinated notes to ‘A-‘ from ‘BBB+’.
“Lloyd’s regulatory solvency ratio and all-market core solvency ratio were stable through 2022, despite significant reserves for the Russia-Ukraine conflict and Hurricane Ian, rising interest rates and investments in private assets through its newly launched investment platform,” the rating noted. agency in an announcement emailed to Insurance Business over the weekend.
“Lloyd’s has comfortable capital surpluses at both its 2022 mid-year regulatory solvency ratio of 179% (2021 year-end 177%) and its 2021 mid-year regulatory solvency ratio of 395% (2021 year-end). 388%). We expect core and market-wide solvency ratios to remain strong even in extreme stress scenarios, such as catastrophic events, or if the current inflationary environment continues into 2023 and 2024.”
Meanwhile, S&P Global forecasts a combined ratio of around 95% by end-2022 for Lloyd’s, taking into account the half-yearly combined ratio of 91.4% and reserving £1.1bn and £2.2bn respectively for the war between Russia and Ukraine. and Hurricane Ian. It expects a combined rate of nearly 95% by 2023.
“We note that Lloyd’s significant exposure to natural catastrophe risk, the challenging macroeconomic environment due to rising inflation, and uncertainty surrounding the Russia-Ukraine conflict provide the potential for volatility in the level of its solvency coverage.” S&P Global said.
“However, this is offset by the stability in the solvency ratio maintained in 2022, better expectations for operating performance and the ability to recapitalize when necessary. The latter was demonstrated in 2017 when the market injected £3bn in the aftermath of Hurricanes Harvey, Irma and Maria; and in 2020, when it injected a further £3.5bn following COVID-19 related losses.”