Malaysia and AirAsia plane crashes hit insurer profits

Lloyd’s was hit with £310 million of aviation claims - the most it has faced in 14 years

Jamie Dunkley
Thursday 26 March 2015 12:46 GMT
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Claims from the two Malaysian Airline crashes added to £310 million of aviation claims
Claims from the two Malaysian Airline crashes added to £310 million of aviation claims

Crashes, airports turning into warzones and lost planes hit the profits of 327-year-old insurer Lloyd's of London after the worst year for airlines since 2001.

Claims from the two Malaysian Airline crashes, fighting at Tripoli airport and other tragedies including an AirAsia plane crashing off the coast of Indonesia in December left Lloyd’s with £310 million of aviation claims - the most it has faced in 14 years.

These disasters came in an otherwise benign year for catastrophe losses at Lloyd’s, whose underwriting syndicates protect against risks including earthquakes and windstorms. It said it was too early to estimate the cost of potential claims from this week’s Germanwings disaster that crashed into the French Alps, although German insurance giant Allianz has already confirmed it is the lead insurer.

Lloyd’s of London can trace its roots back to 1688, when it was founded in Edward Lloyd’s Coffee House in the City of London. It is now the world’s largest insurance market with gross written premiums of £25.3 billion.

Its pre-tax profits dipped from £3.2 billion in 2013 to £3.16 billion last year in what its boss Inga Beale described as “challenging market conditions”.

As well as claims from aviation disasters, insurers’ profits have been hit by low interest rates and new investors like hedge funds, looking for better returns than conventional investments. The abundance of capital in the Lloyd’s market has held down the prices insurers can charge, creating “soft market” conditions.

“The robust performance of the market in 2014 reflects a collective achievement, of which we should be proud,” Beale added.

Lloyd’s first female chief executive said she welcomed the latest wave of takeover activity in the market because it was attracting overseas capital. Recent deals include Fairfax Financial of Canada buying Brit Insurance. She also highlighted the growing threat of Cyber-attacks and called for new investor into Lloyd’s to support this “new risk exposure”, rather than the data-driven property and casualty market.

Mark Grice, head of insurance at accountancy Mazars, said: “This is a good result given the low interest rate and premium rate environment. Also for Lloyd’s it has been a year of development as it sets operations in emerging markets such as Beijing. The Lloyd’s platform remains attractive as can be seen by M&A activity and its intent to modernise.”

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