Increased central assets and better controls mean Lloyd's of London is better positioned than in previous cycles
Ratings agency Moody's considers that Lloyd's is better positioned than in previous cycles prior to an insurance downturn.
It pointed to increased central resources and the significantly improved controls introduced in recent years.
In adiditon, declining calls on the Central Fund and the resolution of Equitas have increased the security offered by Lloyd's of London for all syndicates.
Aggregate market returns on average equity for 2007 and 2006 have been 29% and 31%, respectively, with the five-year return on average equity to 2007 of 19%.
Central assets for solvency purposes are materially higher than previous years at 15% of GPW, comparing favourably with 6% of GPW in 2002. With declining solvency deficits, Lloyd's central solvency ratio (central assets as a percentage of solvency shortfalls) has increased to 1463%.
Other positives singled out by Moody's include: Lloyd's global franchise, its access to diversified business, its ability to trade using Letters of Credit and its reduced capital requirements, based on its partial mutuality. The ratings agency felt these offset disadvantages such as the potential for additional costs due to mutuality, the need to improve efficiency, and applicable UK tax rates.