The Lloyd's of London insurance market said on Wednesday the chances of it making a profit in 2005 were small after it faced claims of around 2.9 billion pounds ($5 billion) from the costliest US hurricane season.
The world's largest insurance market raised its net loss estimate from Hurricane Katrina, the insurance industry's costliest event on record, to 1.9 billion pounds from 1.4 billion pounds.
Hurricanes Rita and Wilma will cost it 535 million pounds and 483 million respectively, the market said.
"The losses may be larger but Lloyd's is financially strong and we can take it in our stride," Finance Director Luke Savage told Reuters in an interview.
Savage declined to estimate what level of loss Lloyd's might record this year.
The 317-year old market, which was brought to the brink of collapse in the 1990s after a series of storms and disasters and a buildup of unresolved claims, expects to be able to meet all its liabilities and said none of its 62 syndicates or mini-insurers had been made insolvent from the storms.
The devastating trio of US storms, which killed more than one thousand, displaced over 1 million and bulldozed the US Gulf coast, are expected to cost the insurance industry around $79 billion.
A growing list of insurers and reinsurers have scrapped profit forecasts following the season, including Hannover Re and Swiss Re.
Munich Re, the world's largest reinsurer, has estimated a net loss of 750 million euros from the US storms.
But while hurting profits, insurers are also expecting to benefit from the hurricane season because it gives them more pricing power over their clients, who have been pressing for cuts after a prolonged period of high premiums after the September 11, 2001 attacks in the United States.
Insurers on the Lloyd's market, such as Hiscox, Amlin and Kiln, have raised millions of pounds of capital to provide more coverage next year to take advantage of the rising rates.
Lloyd's said it expected to increase its capacity to underwrite risks in 2006 by 7 percent to around 14.7 billion pounds. Before the US hurricane season, the market had expected to reduce its 2006 underwriting capacity by around 7 percent.
Katrina is set to be Lloyd's second-biggest single-event loss, after claims related to the September 2001 attacks on the World Trade Center, estimated at up to $3.5 billion.
Higher premiums after the attacks helped Lloyd's to post three years of profits, starting in 2002, after six consecutive years of losses.
But Lloyd's 2004 pretax profit fell nearly 30 percent to 1.36 billion pounds after clocking up 1.3 billion pounds of losses from a string of hurricanes in Florida.
The market has beefed up its regulatory regime in recent years to improve its ability to weather large losses.
Comments
Comments are closed.