Rating agency puts Lloyd’s on negative due to COVID-19 exposure

Fitch Ratings Inc. placed the AA- financial strength rating of Lloyd’s of London on “rating watch negative” on Thursday due to concerns over the effect of the COVID-19 pandemic on the market.

In a statement, the rating agency said its decision to place the market on rating watch, which could signal a future downgrade, “reflects the uncertainty and increased risk to Lloyd's earnings and underwriting performance due to claims emanating as a result of the COVID-19 pandemic.”

Lloyd’s is potentially exposed to pandemic-related losses through policies covering event cancelation, business interruption, directors and officers liability, and trade credit risks, the statement said.

In addition, insurers trading at Lloyd’s are exposed to investment losses due to falling interest rates and the investment market turmoil resulting from the pandemic, Fitch said.

Fitch has had a negative outlook for Lloyd’s since June 2017, due to concerns over its underwriting results. Lloyd’s announced improved results last week, but the improvement “was below our expectations,” Fitch said.

More insurance and risk management news on the coronavirus crisis here.