S&P Global Rating has upgraded Lloyd's of London, the global insurance market that services over 200 countries and territories, to stable from negative.

One of the reasons for the upgrade is that Lloyd's has reduced its reliance on letters of credit (L/Cs) in its efforts to reverse its £3 billion (US$3.6 million) losses over the past two years.

Significant improvements

The specialist insurance and reinsurance market has taken significant actions to remediate its portfolio and improve its performance in 2019-2021 says S&P, which also sees brighter prospects under its new leadership team.

Lloyd's has scaled its exposures within and taken actions to better manage the worst-performing 10 per cent of its business.

The insurance market is stemming its losses. It lost £1 billion (US$1.25 billion) in 2018 compared with a £2 billion loss in 2017.

Fewer L/Cs

Improvements are a result of reduced L/C usage as part of the market's capital, the recapitalisation of syndicates, and improved risk management according S&P.

Lloyd's chief financial officer described the ratings upgrade as "great news" and said it was based on several positive factors, "most notably, the strengthening of Lloyd's capital position."

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.