In a special comment on the Lloyd's insurance market, Moody's Investors Service has said that its continuing loss of market share is unlikely to affect the Syndicate Performance ratings.
Senior analyst and author of the new report Robert Smith said: "Despite increasing to £12bn, Lloyd's capacity for 2002 reflects a continuing decline in market share. Moreover, Lloyd's relative position for 2003 could potentially deteriorate further once the latest solvency position at 31 December 2001 is taken into account.
"However, in the final analysis, Lloyd's will be judged on its ability to respond to policyholders' needs as regards both underwriting expertise and the financial strength of the businesses operating in the market and this loss of market share is not the most significant factor in determining the market's future," he added.
Moody's also said in its report that it expects the reduction in the number of syndicates to continue. In fact, it expects the market to contract to as few as 40 or 50 syndicates. Moody's believes that the recent Chairman's Strategy Group report is likely to accelerate this consolidation.
The company also warned: "Even though the probability is remote, a further major event affecting this business ahead of summer 2002 could potentially exert severe pressure on liquidity, crystallise losses for members and put even greater strain on the Central Fund, despite the likelihood of very positive returns for the 2002 account."
Finally, Moody's raised concerns over the fact that 45% of Lloyd's 2002 capacity is supplied by insurance companies - which in its view do not need Lloyd's. This raises concerns over the ultimate commitment of this type of capital to Lloyd's in the event of another market upheaval.
