Although Lloyd's does not officially disclose the size of premium rate rises, underwriters within the market report that premium rates have jumped by as much as 25 per cent, and in some cases quadrupled.
The survey of trends for the past three months among 25 leading underwriters shows that 85 per cent of those questioned reported an increase in insurance rates, while none reports a fall.
For the first quarter of this year 87 per cent expect rates to continue to increase, while 13 per cent expect them to remain at current levels. No one expects them to fall.
However, the expenses of many insurance syndicates, into which Lloyd's 20,000 members are grouped, have risen. Of those surveyed, 40 per cent recorded increases, 49 per cent showed no change, and 11 per cent reported a decrease. Some 43 per cent expect the upward trend to continue into the first quarter of the current year.
The high cost of administration, as Lloyd's has tightened up its internal regulatory procedures, will have fuelled the rise.
In order to ease the cost burden of agency companies that run insurance syndicates, Lloyd's has decided that from 1 January, it will no longer be mandatory for agencies to take out insurance to protect themselves against suits for damages brought against them by members for whom they act or individuals with whom they do business.
In the past Lloyd's has stipulated that agency companies must have this insurance cover if they were to be allowed in the market.
Lloyd's told its members in June last year that 'severe difficulties have been experienced in establishing a viable market for such insurance this year, and it seems likely that the situation may be even more uncertain next year.'
The move has caused dismay among underwriting members. They had been relying on the agencies' insurance protection to help to finance future settlements in instances where they are suing the agents over the pounds 2.5bn of losses that have surfaced in the market in the past two years.Reuse content