S&P Global Ratings has revised its outlook on the Society of Lloyd’s (Lloyd’s) to negative from stable due to loss estimates relating to hurricanes Harvey and Irma, S&P said in a statement Thursday.
The change “reflects our expectation that the market will produce a combined ratio of about 95% in 2018 and 2019,” S&P said in the revision note.
S&P also affirmed its ‘A+’ insurer financial strength and long-term counterparty credit ratings on Lloyd’s, the statement said.
In addition to Lloyd’s estimated losses of more than $4.4 billion (3.3 billion pounds) from hurricanes Harvey and Irma, “We expect further major losses from Hurricane Maria and other potential catastrophe events in fourth quarter (Q4) 2017,” S&P said.
“These losses are significant relative to peers and Lloyd’s annual earnings, and emphasize the market’s exposure to catastrophe risk,” added the ratings agency.
Lloyd’s capitalization had already deteriorated during 2016 and 2017 due to higher catastrophe exposure and premium growth, the latter in part due to foreign exchange movements, S&P said, as expense and attritional loss ratios remained high in the first half of 2017.
Further, S&P said “significant uncertainties remain,” including potential further major losses, weaker-than-anticipated rate recovery, or members choosing to take advantage of rate revivals outside of their Lloyd’s platforms.
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