George Lloyd-Roberts, chairman of the Lloyd's Non-Marine Association, said yesterday that estimates of the total insured losses in the world's insurance community were between dollars 7bn and dollars 8bn (pounds 3.5bn and pounds 4bn).
But he stressed that the Lloyd's market would be less exposed than it was at the time of Hurricane Hugo in 1989 because US insurance companies had carried large parts of the risks on their own books rather than laying them off in the world's reinsurance community.
Mr Lloyd-Roberts said that the high cost of reinsurance had deterred them. 'The US insurance industry is buying far less catastrophe reinsurance than it used to,' he said.
In the US, the State Farm insurance company said it estimated that policyholders may claim dollars 1.5bn in insurance damage. So far the company has already paid more than dollars 300m to cover living expenses and other costs faced by its customers since the storm. The company said that it has more than dollars 18bn in its policyholder protection fund to withstand the claims.
Lloyd's said that it was arranging a special settlement scheme to ensure that payments of claims were made speedily.
Lloyd's has yet to quantify the full effects of Hurricane Hugo on its trading accounts. Because there was such a high degree of inter-syndicate trading within the Lloyd's market on reinsurance business the losses became magnified many times over in the so-called London market excess-of-loss 'spiral'.
This type of trading contributed significantly to the pounds 2bn worth of losses that Lloyd's announced earlier this year. Lloyd's has since introduced a range of reforms to prevent the situation from recurring.
Lloyd's reckons that about 20-30 per cent of all claims from Hurricane Andrew will fall on the London market, with half that amount being met by underwriters within its own market.
When the hurricane hit Florida there were fears that insurance claims could be as high as dollars 20bn, with possible claims swelled by companies that had taken out 'business interruption' insurance.
But underwriters have been attempting to gain a precise calculation of the actual amount of property that had been insured, rather than estimating the total cost of the damage.Reuse content