Lloyd’s sees market turn in 2005, but opportunities remain: A.M. Best

While market conditions for Lloyd’s in 2005 will be less favorable than in recent years, A.M. Best still sees opportunities for underwriting profit in the London market.
Price weakening is already being seen in 2004, with pricing having peaked in 2003 for most classes, A.M. Best notes in a special report on the Lloyd’s market. Short-tail lines have generally begun to soften, although terms and conditions remain firm, the rater notes. The exception may be marine hull, where rates continued to rise in 2004.
“For the full 2004 underwriting year, A.M. Best expects rating adequacy to remain quite good for most lines. An example of a class where adequacy in 2004 is more doubtful is aviation hull for the major airlines.”
Price pressure is also being witnessed on long-tail casualty lines, with A.M. Best predicting rate decreases in most lines in 2005, specifically for business outside the U.S. “In certain key long-tail markets for Lloyd’s, rates are already coming down; for example, U.K. professional indemnity rates have reduced.”
Overall, A.M. Best says the London market has not become “irresponsible” despite price pressures. “Influences that have helped maintain discipline include the low interest rate environment; shareholder expectations of an adequate return; and adverse prior-year development influenced by claims inflation.”