Syndicate 561 was set to make a large profit for the 1992 underwriting account but now may no more than break even because of the severity of the losses arising from the hurricane a few weeks ago in Florida.
Underwriting agents who have introduced individuals to the syndicate, made up of around 3,000 underwriting members, were told of the problems at a meeting at the agency group last week.
According to Bankside, the agency anticipates that Hurricane Andrew will generate gross claims to the 1992 trading account of dollars 115m (pounds 68m). Once the syndicate has collected on its own insurance policies in the reinsurance market, the net claims will be reduced to dollars 78m.
Losses on the syndicate were worsened because of the syndicate's exposure to claims falling on a small US insurance company, American Reliance.
A service company acting for Bankside in New Jersey, and run by Martin Lynskey, a well-respected property underwriter in the US, had insured American Reliance with syndicate 561 against large losses.
American Reliance had a large exposure to risks in Florida, where Hurricane Andrew caused most of its damage. The losses from the American Reliance link rose to dollars 23m, which concerned professional underwriters in London because they were much higher than expected. After collection on the syndicate's own reinsurance policies, losses from this source will be cut to dollars 10m.
However, Elvin Patrick, Bankside's chairman, and Peter Grove, the syndicate's underwriter, have stopped underwriting activities through the service company and business from this source is being run off.
In Lloyd's some agencies that introduced members to the syndicate are considering whether to continue to support it in the light of the setback. Some agents may withdraw their existing members or cease introducing other members to the syndicate.Reuse content