Lloyd’s of London recorded losses of £697m today following the insurance industry’s costliest half year on record for catastrophes.
The specialist insurance market, which is made up of 88 underwriting syndicates, incurred £6.7 billion in claims after major natural disasters in Australia, New Zealand, Japan and the United States.
Lloyd’s said 2011 was set to be the second most expensive year ever for insurers but added that its own claims were being met without any call on its central fund – its fund of last resort.
Chief executive Richard Ward said: “These are tough times for the insurance industry, but we are well positioned to handle them.”
The £1.2 billion of predicted claims from the Japanese tsunami and earthquake made it the fourth biggest event to impact on the London-based market. The most expensive was Hurricane Katrina in 2005, which caused claims worth 4.3 billion US dollars.
The earthquake in New Zealand and the floods in Australia are expected to cause claims of £860 million and £200 million respectively.
Today’s loss for the six months to June 30 – the worst in the seven years that Lloyd’s has published results for the half year – compares with profits of £628 million a year ago, when it faced claims from the Chile earthquake and Deepwater Horizon oil rig explosion in the Gulf of Mexico.
As well as the high number of disasters, Lloyd’s has had to cope with challenging investment conditions, resulting in a return of £548 million compared with £597 million a year earlier and £708 million in 2009.
The Lloyd’s market has shown in recent years that it is more than able to cope with major catastrophes, including US hurricanes.
Among changes to modernise the market, Lloyd’s introduced a new franchise structure and phased out the number of Names who backed the market with an unlimited liability.
Its results today showed record central assets of £2.47 billion, up from £2.23 billion a year earlier.
Chairman Lord Levene said: “2011 has already been one of the most challenging years on record for the insurance industry with major natural catastrophes devastating communities in Australia, New Zealand, Japan and the US.
“Lloyd’s ability to pay billions in claims to help these communities rebuild is unquestioned and the fact that we have managed to do so without any call on our central capital reserves is testament to the market’s exposure management.”