Proposed reforms to the structure of the world’s oldest insurance market announced by Lloyd’s earlier this week are being praised by rating agency Standard & Poor’s. Although the announcement does not impact Lloyd’s single-A rating, S&P says the reforms “address many of the structural weaknesses in the Lloyd’s market which, if left unresolved, would make it increasingly difficult for Lloyd’s to sustain its franchise in the global insurance marketplace”. Corporate capital retention and growth are key tot he proposal, says S&P, commenting that it is not efficient for corporate and third-party capital to co-exist in the market. Lloyd’s proposal to act as a franchisor will bring “clarity” to the market and bolster Lloyd’s role in business planning and monitoring the market. However, the challenge will be to balance this new role with the need for investor innovation and to allow corporate capital the same level of freedom found in other markets. S&P admits that the proposals do show Lloyd’s focus on corporate capital and “remove the concept of the separation of capital provision from underwriting”. While Lloyd’s will be looking to find a way for individual investors to participate in the market, the moves clearly signal the end of unlimited liability for those individuals. In terms of Lloyd’s intention to move to GAAP accounting, rather than its traditional three-year reporting structure, S&P says this may affect the amount of capital in the market and therefore its rating. “The move to annual accounting would imply an annual profit payout, and would require the solvency regime to be rewritten.” S&P acknowledges that there have already been challenges to the proposals, specifically from individual investors, adding that these investors do hold some sway in the decision under Lloyd’s “one member-one vote” structure. “The planned reforms could be watered down as they are ‘negotiated’ with interested parties (capital providers, brokers, regulators, the U.K. government, the European Union) during the consultation process,” S&P admits.