A United States regulator is set to investigate the solvency of the Lloyd’s of London insurance market to check that it can meet its £1.3bn exposure to the terrorist disaster, it was disclosed today.
The US-based National Association of Insurance Companies (NAIC) will be examining Lloyd’s financial position to establish whether it has sufficient cash and reserves to meet all the claims.
It is thought that the inquiry is being headed by John Oxendine, Insurance Commissioner for the State of Georgia, who is expected to hire a firm of London-based American accountants to assist with the inquiry.
The NAIC is due to hold a planning meeting early next month to decide how to proceed.
Lloyd’s refused to comment on the move, but a spokesman for the Financial Services Authority, which regulates the insurance industry, confirmed that NAIC was looking into Lloyd’s solvency.
‘‘A team from NAIC have been in touch with Lloyd’s and are looking at Lloyd’s solvency and the ability of Lloyd’s to meet its claims,’’ he said.
As regulator, the FSA had been approached by NAIC but would not be directly involved in the investigation, he added.
It was not the first time the market’s solvency has been investigated by the US regulatory body, which has looked at the market’s books on two previous occasions in recent years, the FSA said.
If the group finds Lloyd’s to be insolvent it could prevent it from writing reinsurance business in the US, though Mr Oxendine has been reported as saying NAIC believes Lloyd’s to be solvent but wants to verify this.
Meanwhile Lloyd’s underwriter Amlin increased the estimate of its losses from the September 11 disaster to £60m from £45m before tax.
The revised estimate was mainly due to increased loses from its Syndicate 2001’s property insurance business, it said.
The group warned that estimates could be increased again in the future and it was likely to be some time before all claims were determined.
But it added that improved insurance rates since the attack were likely to soften the impact of the loss.
Since September 11 airline insurance premiums have increased by more than 300%, and around 65% of the groups Amlin insures renew their cover during the last quarter of the year.
Following the rise in premiums the group has applied to Lloyd’s to increase its underwriting capacity for 2002 to £800m from £700m.
Amlin said it was now limiting third party liability cover for terrorism to £34.4m per policy, and was charging terrorism cover for passengers on a per person basis to reflect the lower levels of people currently flying.
It is also excluding terrorism cover from insurance renewals for major buildings in the US.