S&P said the rating reflects the ongoing commitment of capital providers to the market, as well as the maintenance of Lloyd's strong competitive position, capitalization and operating performance.

The rating service noted, however, that these positive factors are partly offset by the market's contingent exposure to Equitas Ltd. (its runoff vehicle for asbestos and other non-life risks from 1992 and before), operational weaknesses requiring strengthening, the London market's legacy administrative processes, and uncertainty relating to substantial reinsurer recoverables.

Standard & Poor's said the stable outlook reflects expectation that:

o Lloyd's main capital providers will remain committed to the market, despite the increasing challenge posed to Lloyd's competitive position by other international markets, particularly Bermuda.

o The operational weaknesses exposed by Lloyd's performance during the 2005 hurricane season will be successfully addressed.

o No material deterioration will occur in the solvency of Equitas as a result of it continuing a successful commutation strategy.

o Central capital will remain at about ?1.75 billion ($3.11 billion U.S.)

S&P said the outlook could be revised to negative if the Central Fund is materially affected by the catastrophe loss activity seen during 2005, or were there to be a material deterioration in Equitas' solvency that indicated a high probability of proportionate cover being invoked.

The outlook could be revised to positive were Lloyd's exposure to Equitas demonstrably reduced, the rating service added.