Best Assigns Ratings to Lloyd’s Syndicate 1084

A.M. Best Co. announced that it has assigned its Syndicate Rating of “A” (Excellent) to Lloyd’s Syndicate 1084, managed by Chaucer Syndicates Ltd., and an issuer credit rating (ICR) of “a.”

“This newly assigned ICR reflects A.M. Best’s financial strength opinion of syndicate 1084 expressed in the credit market scale,” said the announcement. Best also noted that it has assigned an ICR of “bbb-” to Chaucer Holdings Plc and a debt rating of “bb+” to its £20 million ($36 million) 8.5 percent subordinated unsecured loan stock. The outlook for all ratings is stable.

“The syndicate benefits from the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates,” said Best. “The rating is based on A.M. Best-specific syndicate criteria. (See A.M. Best’s rating methodology for Lloyd’s syndicates at www.ambest.com).”

The report noted that “Syndicate 1084 has an excellent business profile within the Lloyd’s market, operating as a well diversified insurer on both a geographical and risk basis. A.M. Best believes the merger of the syndicate with Chaucer syndicates 587 and 1096 at the end of 2003 will likely enable a high degree of flexibility for the allocation of capital across lines of business.”

Best also indicated that it believes “the constituent syndicates (587, 1084 and 1096), which make up syndicate 1084 for the 2004 underwriting year, will likely produce a combined operating performance in the upper half of the Lloyd’s market when the 2002 and 2003 underwriting years are closed. Based on Quarterly Monitoring Returns (QMR) at March 2004, the combined profit on capacity is forecast at 17 percent for the 2002 underwriting year.”

The rating agency noted, however: “Offsetting this are the historic losses incurred on the casualty account. The syndicate has suffered adverse reserve development in respect of its U.S. liability business on the last three closed years of account (written by syndicate 1096). At year-end 2001, the prior year underwriting result was a loss of GBP 6.4 million (USD 11.4 million) for syndicate 1096, the majority of which relates to 2000 and prior years U.S. casualty lines.”

Best said it would “closely monitor the development of U.S. casualty reserves, although the syndicate exited from poorly performing U.S. casualty binders in 2002.”