Annus horribilus for Lloyd’s
Insurance giant loses $823M in 2011, a year of natural disasters
Lloyd’s of London, the world’s oldest insurance market, is struggling to raise premium rates after the worst year for natural catastrophe claims on record, chief executive officer Richard Ward said.
Lloyd’s posted a pretax loss of £516 million ($823 million) in 2011, compared with a £2.2 billion profit in 2010, it said Wednesday in a statement. The loss is the biggest since the 9/11 attacks and the first since 2005, when Hurricane Katrina struck New Orleans.
Lloyd’s insurers are seeking to boost premium rates after earthquakes in Japan and New Zealand, windstorms in the U.S. and flooding in Thailand cost insurers about $105 billion last year. That made 2011 the industry’s most expensive year on record, surpassing the $101 billion paid out in 2005, according to Munich Re. Lloyd’s lost £103 million in 2005.
“Rates will need to increase to be able ensure that insurers over the length of the cycle are able to deliver a sustainable profit,” Ward said.
Insurers said in February rates may rise between 4 per cent and 17 per cent as a result of the losses. Ward said these are not enough.
“I am disappointed that, given the exceptional level of catastrophes in 2011, insurance rates have not responded more positively,” he said.
Premiums for property treaty policies and British automobile policies rose in the “low double digits” this year compared with 2010, according to finance director Luke Savage.
Energy coverage was up 7 per cent while aviation, marine and casualty rates were little changed.
Lloyd’s said it paid out £1.07 in claims for every £1 it took in premiums last year, compared with 93 pence in 2010.
That’s in line with U.S. property and casualty insurers and Bermu- dian reinsurers. Typically when insurers make losses their capital is eroded, meaning they have to take less risk and raise prices in the following years.
It’s proving difficult to raise prices because the industry is awash with excess capital, Savage said. “So long as there remains a significant amount of excess capital it’s hard to see rates turning across the board,” he said.