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Lloyd’s devises syndicate rating system

The Lloyd's Franchise Board has devised a system of ranking syndicates to pick out the worst-rated performers for greater oversight, The Insurance Insider understands.

Each syndicate has been assigned a number from one to four, with one denoting the highest-rated performers and four the lowest.

The rankings are based on assessments of each syndicate's profitability and performance.

Lower-ranked syndicates will come under closer scrutiny from the Lloyd's performance management team.

For example, this means that adding new lines of business to their portfolio could be more difficult, whereas top-ranked syndicates are more likely to have approval for changes to their business plan fast-tracked.

Syndicates with a mid-tier 2 and 3 ranking are likely to fall somewhere in the middle in their treatment by the Corporation's regulators.

Few details are known of how the rankings are compiled but it is not thought that size or the length of time a syndicate has been established are determining factors.

Some small, relatively new operators are known to have a high ranking.

The system has been in use for some time but Lloyd's has recently written to managing agents about the significance of the ranking.

The 1-4 system is similar in concept to the "traffic light" method Lloyd's introduced when grading syndicates on their readiness for Solvency II.

Syndicates were rated from green (for the most ready) to red (the least), with yellow, amber and pink in between.

Lloyd's eventually threatened sanctions for the syndicates with a pink and red rating that did not take sufficient remedial action on their Solvency II readiness.

A Lloyd's spokesman said: "This process is just one of a number of tools used as part of our planning activity which allow us to take a proactive role in ensuring the strength and stability of the market, the results of which have been borne out over recent years."

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