A report on Lloyd's of London bucks the trend of recent press reports by finding the market financially secure, strongly regulated and set to outperform other insurers across the market cycle.
HSBC Securities has analysed the future prospects for Lloyd's and disputed the financial myths that have grown up around the market during its 300-year history.
Prominent among these are the beliefs that Lloyd's is too expensive, financially insecure and has results that compare poorly with others.
It concludes that overall, Lloyd's compares favourably with the company market and remains attractive to new capital as demonstrated by the continued investment of well-respected insurance companies.
"Overall, I think the outlook for the Lloyd's market is more positive than many people realise," said the report's author, senior insurance analyst Joanna Parsons.
"Lloyd's has received good financial ratings from leading agencies and has re-established itself on a far stronger financial footing.
"Crucially for its future, the market still has the ability to outperform others across the insurance cycle.
"HSBC believes that Lloyd's will continue to be a major player in the global insurance industry.
"Although the market went through a difficult period in the early 1990s, the signs are that ground is now being made up."
Some of the report's key findings:
- the market offers economies of scale and is continuing to work to reduce overall expenses. Current charges have not deterred new entrants
- analysts show Lloyd's is adequately capitalised and financially sound with total assets of more than £15 billion
- business written in Lloyd's tends to be more volatile but the market's profitable years have been better than average
- the market should outperform across the insurance cycle
- Lloyd's is regaining its position as one of the world's major insurers. No other entity has the same reputation for underwriting talent
- reports of Lloyd's demise are premature. The brand is probably the strongest in the insurance world. Lloyd's has the potential to remain an important insurance market.