Best Affirms Lloyd’s Syndicate 510 ‘A’ Rating

A.M. Best Co. announced that it has affirmed its Syndicate Rating of A (Excellent) of Lloyd’s Syndicate 510 with a stable outlook. The U.K.’s R J Kiln & Co Ltd. is the Synicate’s manager.

“The rating reflects the syndicate’s excellent current and prospective underwriting performance and business position, in addition to the financial strength of the Lloyd’s market–currently rated A- (Excellent)–which underpins the security of all Lloyd’s syndicates,” said Best. It added that the rating was determined using its “specific syndicate criteria,” and noted that the syndicate’s “recent rapid capacity expansion” could be a “partial offsetting factor.”

Best said it “believes the syndicate is likely to return to profitability for the 2001 year of account (Syndicate Quarterly Return (SQR) projection at June 2003 was 0.75% of capacity) despite a World Trade Center loss of GBP 26 million net (USD 42 million) and an excellent return is forecast for the 2002 (SQR at June 2003 was 16%) year of account. Syndicate 510 has a record of strong underwriting results. Although small losses were recorded for the three most recent closed years, the syndicate still outperformed the Lloyd’s market as a whole.”

The bulletin also noted that “Syndicate 510 has an excellent market profile for many of the short tail classes in which it specialises. The well diversified book has been developed through long-standing relationships with clients, brokers and reinsurers. The syndicate is a recognised market leader in the five main business groups it operates–accident and health, aviation, marine/special risks, property and reinsurance–enabling it to determine pricing and underwriting terms.”

Commenting on the rapid capacity expansion, Best indicated that “Syndicate 510 has increased its stamp capacity by 182% over the three most recent years of account (GBP 266 million (USD 445.8 million) in 2001 to GBP 484 million (USD 811 million) in 2003). This rapid growth could put pressure on underwriting and ultimately on the profitability of the syndicate, which could be compounded once the market softens. However, A.M. Best believes that enhancement of the syndicate’s management and its philosophy of creating small new underwriting teams to ensure a specialist focus is maintained will facilitate the handling of higher premium volumes.”