Revival in air for insurers after a year of blows, says boss of Lloyd's

Record level of premium writing capacity likely despite second-highest claims bill in 2011

The insurance industry can bounce back from the string of natural disasters that left it nursing its second-highest claims bill last year, according to the boss of the Lloyd's of London insurance market.

Richard Ward said insurers had the financial strength to stomach claims that are forecast to hit $108 billion after a year in which the globe was rocked by the Japanese tsunami, New Zealand earthquakes and floods in Thailand. Forecasts by reinsurer Swiss Re put the cost of that trio of natural disasters at $35 billion, $12 billion and up to $11 billion respectively.

"These are big numbers," Ward said. "And yet people are not questioning our financial viability and they are not questioning our ability to pay our claims."

Add in the floods in Australia and the cost of Hurricane Irene, which hit the Caribbean and American east coast in August, and 2011 comes second only to 2005. In that year, Hurricanes Katrina, Wilma and Rita helped generate $123 billion in insured losses, according to Swiss Re. The string of disasters meant that Lloyd's fell to a £697m pre-tax loss in the first half of 2011, compared with a £628m profit a year earlier.

"Why was the loss that small when we were dealing with the costliest six months on record?" said Ward. "Two things: firstly, we have a far better understanding of the risks we are running in the business, and secondly we have the right capital to support it."

Last year is also set to dwarf 2001, previously the second-costliest year for the industry after the terrorist attacks on the World Trade Center in New York. Ward believes that Lloyd's geographic diversity has helped it to cope. Some 45 per cent of its business is in North America, with 20 per cent in Britain, 15 per cent in continental Europe and 20 per cent in the rest of the world.

"The reality is the premiums from the UK and US are in effect helping with claims from the Far East but we are an international business so that is bound to happen. We need that diversity of business and we are working on the assumption that it doesn't happen all at the same time."

The 300-year-old insurance market is also expected to have a record level of premium writing capacity this year. An annual survey of companies at Lloyd's by Insurance Insider found that capacity is expected to have risen to £23.7 billion from £23.3 billion last year.

However, soaring claims have sparked takeover talks between a number of Lloyd's insurers. Beazley said just before Christmas that it might try to buy Hardy Underwriting, a year after an initial approach for its smaller rival fell through. In the same week, Bermudan reinsurer Haverford ended talks to buy a stake in Omega after the two sides failed to agree on a price.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Voices
Barn owls are among species that could be affected
charity appeal
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas