Insurers could be hit by more than $600m (£370m) in aviation claims this year after the Malaysia Airlines disasters and fighting in Libya, the chief executive of Lloyd’s of London warned yesterday.
Inga Beale, who joined the world’s largest insurance market in January, said the sector had suffered an “unusually high incidence” of claims, with experts having already predicted that the cost of insuring aircraft will rise.
A total of 298 people, including 10 Britons, were killed when the Malaysia Airlines flight MH17 travelling from Amsterdam to Kuala Lumpur was struck by a missile over eastern Ukraine in July. Flight MH370 disappeared in March, and Tripoli airport was last month seized by rebels who set fire to planes and buildings.
Ms Beale said: “The global aviation ‘hull war’ market [cover for the possibility of war-related damage] accounts for around $65m of premiums per annum; yet already in 2014, claims could exceed $600m for the insurance industry. In a period when premium rates have generally fallen, this is a reminder of why pricing must reflect the underlying risks which are being written.”
Despite the spectre of aviation claims, fewer natural disasters and improved investment returns helped Lloyd’s of London to report a 21 per cent jump in pre-tax profits to £1.67bn during the first six months of 2014.
Investment income climbed to £642m, up from £247m in the first half of 2013, helped by higher yields in Lloyd’s corporate bond portfolio, with the market’s combined ratio coming in at 86.9 per cent. Ratios below 100 per cent in effect mean an insurer is taking in more premiums than it is paying out in claims.
Ms Beale added: “While these results show an improvement over the equivalent period in 2013, the market conditions are becoming increasingly challenging.
“Pricing continues to be under pressure from the additional capital that has entered the industry as a result of the long period of low interest rates – this has led to an increasingly competitive environment. The market has reacted well, demonstrating underwriting discipline with overall premium growth being restrained.”
Lloyd’s remained tight-lipped on rumours it is planning to quit its Richard Rogers-designed One Lime Street building, where it has been since the Eighties. Sources close have suggested it is eyeing a new development opposite nicknamed “The Scalpel”.
According to the sources, it is tiring of the expensive running costs of the Lloyd’s building and has the option to move out in 2021 under the terms of its lease. Lloyd’s pays nearly £17m in annual rent but service charges are twice the cost of other City buildings because of “eye-watering” maintenance costs.
Property experts believe the building’s owner, Ping Ang, could struggle to find another tenant, and Lloyd’s is also believed to be considering moving to the “Gotham City” skyscraper on 40 Leadenhall Street, masterminded by TIAA Henderson Real Estate, which received planning permission in February.Reuse content