Aon Benfield: Lloyd's Capital Strengthened in First Half

Robert O'Connor
LONDON, Nov 11, 2009 (A. M. Best via COMTEX) --

As a result of an improved investment environment and the arrival of new capacity, Lloyd's capital position strengthened "significantly" in the first six months of 2009, according to reinsurance broker Aon Benfield.

In a report titled "Lloyd's Update ? Evolution," Aon Benfield said Lloyd's pro forma capital grew to 16 billion pounds (17.85 billion euros) in the first six months of this year. This represented an increase of 13% and a year-on-year rise of 30%, Aon Benfield said. "Pro forma" is a term used to refer to the aggregate of syndicate accounts, members' funds at Lloyd's and financial statements of the Society of Lloyd's.

Pro forma pretax profits increased by 39% to 1.3 billion pounds, Aon Benfield said.

The report estimated Lloyd's current capacity at 17.6 billion pounds, up from 17.4 billion pounds at the start of 2009. The increase, Aon Benfield said, was due to the entry of new participants to Lloyd's.

Despite a conservative investment strategy, the report said, Lloyd's "has benefited from improved investment market conditions in the second quarter of the year."

Lloyd's boosted its Central Fund by 36 million pounds through the repurchase of 102 million pounds in subordinated debt, Aon Benfield said.

Dominic Christian, chief executive officer international at Aon Benfield, said Lloyd's has benefited from the agreement in June 2009 that settled liabilities involving Equitas, the reinsurer that was set up in 1996 to handle pre-1993 nonlife liabilities at Lloyd's. These liabilities involved asbestos exposures in the United States (BestWire, June 29, 2009).

Lloyd's was cushioned against the kind of big losses that hit other markets in 2008 by its capacity structure, said Christian, who warned that Lloyd's will face increased competition in 2009.

"Lloyd's remains an attractive platform for companies looking to diversify their risk portfolio," Christian said. "And, in line with other insurance and reinsurance markets across the world, it has continued to provide capacity to clients through testing conditions in the wider global financial landscape."

Lloyd's currently has a Best's Financial Strength Rating of A (Excellent).

(By Robert O'Connor, London editor: Robert.OConnor@ambest.com)