Lloyd's of London warned yesterday that the market faced another hard year after a series of major disasters almost halved its profits in 2010 before this year's earthquakes in Japan and New Zealand.
Richard Ward, Lloyd's chief executive, said: "I'm not looking forward to it. It's going to be a difficult, challenging year. We have got disasters in the first quarter and we have got another three quarters left, with the US windstorm season to come."
Mr Ward added that rates were still weak due to excess capital in the industry and that returns on cash invested in financial markets were down too. He said Lloyd's members would have to show discipline in writing profitable business.
Lloyd's has not put a figure on estimated losses to its member firms from the Japan quake and resulting tsunami but Mr Ward said the costs would be within the limits of its scenario modelling and that the market's member firms would be able to cope with the expected payouts.
He said that despite his concerns about the year, Lloyd's was able to withstand any further shocks. "We are in a strong financial position that is able to deal with whatever we have to deal with throughout the year."
An earthquake in Chile, the first New Zealand quake, floods in Australia and the Gulf of Mexico Oil spill were behind £2.2bn of total net claims that sent pre-tax profits down 43 per cent to £2.2bn.
The Chilean earthquake in February last year was the single biggest cost to Lloyd's and accounted for about 40 per cent of total claims.
Mr Ward said: "Of course profits were down on 2009, which was a catastrophe-free year. When the wind doesn't blow and the world doesn't shake we make strong profits. When the wind does blow and the world shakes, we make solid profits."
Cost of disasters to Lloyd's
Chile earthquake: £857m
New Zealand earthquake: £428m
Deepwater Horizon oil spill: £375m