The firm, Chatset, run by two Lloyd's underwriting members, John Rew and Charles Sturge, suggested that Lloyd's was under-reserved because of the steady stream of pollution and asbestos-related claims in 1992.
This occurred at a time when Lloyd's was unable to finalise figures on 255 trading years in the market, an increase of 102 on the previous trading period.
Accounts within Lloyd's have not been finalised because of the uncertainty surrounding the losses, which by next year are expected to climb to pounds 7.5bn over four trading accounts.
Lloyd's reacted angrily to the suggestion by Chatset that it could not afford to pay future claims up to pounds 8.6bn. The market's authorities, led by David Rowland, chairman of Lloyd's, and Peter Middleton, chief executive, have invited Mr Rew and Mr Sturge for talks about how they have arrived at their figures and forecasts.
Lloyd's stressed that in trust funds of insurance syndicates (into which all 20,000 members of the market are grouped) there are substantial reserves against pollution and asbestos claims. Lloyd's said that it planned to take over much of the risks of past accounts in a new reinsurance company that it is setting up, NewCo. That company would take over all the available reserves.
However, Lloyd's admitted that in the past 'there has been no coherent attempt to establish, centrally, sound data relating to old year liabilities, so, as a first stage of the NewCo project, detailed information is being collected relating to all old year exposures.
'This work is being carried out by three teams of external actuaries analysing syndicates' likely claims and known reserves for all risks dating from the 1985 and prior underwriting years.'
In its report yesterday Chatset said: 'The inevitable conclusion is that although Lloyd's has declared profits it has never made a penny since the Second World War.
'Had the reserves on the business been set at the right level from the outset, losses would always have been reported each year. Lloyd's would contain a mountain of cash set beside an abyss of liability.'
Chatset added that the only way to resolve the problem is for the market to lift premium rates, restrict the type of insurance available, cut costs, and double investment returns.Reuse content