Some have criticised the speed at which LLoyd's start-ups have achieved a financial strength rating
Criticism over the number of new commercial ventures operating in the Lloyd’s market has recently increased.
The Lloyd’s market has been bolstered by a further £400m of capacity in the last 18 months. And there are reports that it is looking at around 18 new propositions for 2007.
But some say that Lloyd’s is too open to new syndicates in the current softening market and the resulting competition puts pressure on existing members.
In its defence, Lloyd’s said it has a rigorous process for admitting new business and that its standards for admissions are high.
Critics have also focused on the ease with which rating agencies issue rating to the new ventures.
Michael Pritchard, an underwriter with Beaufort Syndicate 318, said the threat from start-ups is exacerbated by the rating agencies.
Speaking at the Association of Lloyd’s Members conference, Pritchard said that previously agencies waited for three years before issuing a rating.
Lloyd’s and the rating agencies have defended the speed at which start-ups achieve ratings.
Lloyd’s said: “The methods by which a rating agency arrives at ratings are transparent and it is not surprising that they would evolve over time.”
While Standard & Poor’s said: “As a rule, we believe a disciplined and conservative approach to rating start-ups is crucial.”
AM Best takes a similar approach, using an additional set of criteria to the initial rating to reflect uncertainty. “Capital levels will need to be well above the assigned initial rating level,” said a spokesperson.
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