Lancashire Holdings Limited has announced agreements to acquire for £266 m Cathedral Capital Limited, a privately owned Lloyd’s insurer, along with loan notes issued by Cathedral’s subsidiary Cathedral Capital (Investments) Limited.“The transaction represents a rare opportunity to acquire a high-quality Lloyd’s business with a short-tail focus, strong business model fit and robust underwriting performance,” Lancashire said in a press release on Wednesday.“The Enlarged Group will have access to an enhanced insurance and reinsurance platform and will benefit from direct participation in Lloyd’s, the world’s leading specialist insurance market. The Acquisition further provides Lancashire with flexibility to respond to the changing industry and market environment which increasingly requires multiple distribution capability.“Lancashire remains committed to its core strategic objectives. Cathedral is an underwriter-led and highly streamlined business with a track-record of excellence that is well aligned to Lancashire’s strategic priority of ‘underwriting comes first’ and nimble operating approach. The acquisition provides Lancashire with scale in existing lines of business and opportunities for further organic growth.”The proposed acquisition has left Lancashire’s ratings - and that of Lloyd’s Syndicate 2010 - unaffected.Insurance rating agency A.M. Best said that the ratings of Lancashire Holdings Limited (Lancashire Holdings) (Hamilton, Bermuda) [LSE: LRE], Lancashire Insurance Company Limited (Hamilton, Bermuda) and Lancashire Insurance Company (UK) Limited (United Kingdom) remain unchanged following the company’s announcement of the acquisition on Wednesday.But Cathedral’s credit rating is under review “with negative implications” pending the completion of the transaction, the agency said.“A.M. Best also has placed under review with negative implications the ICR of ‘bbb+’ of Cathedral Capital Holdings Limited (United Kingdom), and the debt ratings of ‘bbb’ on its USD 10 million and EUR 12 million floating rate subordinated notes both due 2034, as well as both tranches of the USD 25 million floating rate subordinated notes, due 2035. The ratings will remain under review pending the completion of the transaction and A.M. Best’s analysis of the future structure of the enlarged group,” A.M. Best stated in a release yesterday.The agency added that Lloyd’s Syndicate 2010 financial strength A rating and its issuer credit rating of ‘a+’ remain unchanged following the announcement of the proposed acquisition.“Cathedral owns both Cathedral Underwriting Limited, which is the managing agent for Lloyd’s Syndicate 2010 and Cathedral Capital (1998) Limited, a Lloyd’s corporate member that provides a share of syndicate 2010’s capital. The remaining capacity is provided by traditional Lloyd’s names.“The ratings of syndicate 2010 are underpinned by the financial strength of the Lloyd’s market and are unaffected by the acquisition,” it said.A.M. Best added that Lancashire’s insurance and reinsurance platform will be enhanced by the acquisition as it will benefit from its participation at Lloyd’s.“Additionally, the transaction will provide Lancashire increased flexibility to respond to the changing industry and market environments. Given Lancashire’s excellent consolidated risk-adjusted capitalization, historically strong operating results since inception, experienced management team, comprehensive risk management program and modest financial leverage, the proposed acquisition is not anticipated to adversely impact the financial position of Lancashire. The transaction is anticipated to close in the fourth quarter of 2013, subject to regulatory approvals and other customary closing conditions.”