Cox looks set to quit Lloyd's market as terror losses rise

Cox, one of Britain's most well-established insurers, is considering exiting the Lloyd's of London market after being forced to increase its estimate of losses caused by the attacks on the World Trade Centre.

Cox, one of Britain's most well-established insurers, is considering exiting the Lloyd's of London market after being forced to increase its estimate of losses caused by the attacks on the World Trade Centre.

Cox yesterday warned that its loss net of reinsurance could almost double from original estimates to £125m following the events of 11 September. The company's shares slumped 15 per cent to 115p.

Michael Dawson, the chief executive of Cox, said: "At these sorts of loss levels, we have had to ask: 'Do we need to look at financing options?' Yes we do."

Mr Dawson said Cox had enough money to meet its liabilities, but needed to raise cash to fund future expansion, particularly in its strongly performing personal lines business, which is outside Lloyd's. This consists mainly of car insurance.

Cox is understood to be in talks with various parties over the sale of some or all of the commercial insurance business it does through Lloyd's as a way to raise capital.

Mr Dawson refused to comment on whether Cox would leave Lloyd's, but said: "Of our £750m of premiums this year, £600m was from personal lines. We are steadily reducing the commercial side."

The company started underwriting at Lloyd's in 1933 and is currently its tenth-largest member. Analysts said the company has decided that the quality of its Lloyd's business lags behind its other lines, which have picked up a lot of market share in recent years.

One analyst said: "The Lloyd's side is weak, as was shown today when they had to increase their estimate from losses again – they had just been too optimistic."

The analyst also pointed out that Cox may have wanted to release as much information as possible to the market so that prospective buyers could fully understand its financial position.

Cox said that its losses may not turn out to be as high as £125m and could be as low as £75m. This is still an increase on its estimate in October of £67m. The company insured a number of the buildings surrounding the World Trade Centre and partly insured the twin towers themselves.

As well as using its reinsurance, Cox hopes to recover some of its losses from third parties such as insurers of the aeroplanes that crashed into the twin towers.