| Abstract: | Based upon a sample of Lloyd's syndicates covering the years 2006-2010, we examine the determinants of (i) the likelihood of being rated and (ii) the rating that is likely to be assigned by Standard and Poor's, from which we document evidence of selectivity bias. Larger, more profitable and liquid syndicates are found to be more likely to receive a rating, and indeed, to have higher ratings. Syndicates with more reinsurance dependence are more likely to be rated, but less likely to obtain a higher rating. Our findings indicate that the 'signalling' hypothesis dominates the 'uncertainty reduction' theory. |
