Lloyd’s £1bn in red due to disasters

LLOYD’S of London is set to report a pre-tax loss of about £1 billion this week after being hit by more than £3.7 billion of catastrophe-related claims last year.

The floods which hit Thailand in late July and only started to ease in January, capped a tumultuous year that observers believe is the most expensive ever for the insurance industry.

Lloyd’s is due to report its annual results on Wednesday. Industry sources believe that it will announce that it has sunk into the red to the tune of £1 billion on the back of the floods and other natural disasters.

In 2010, Lloyd’s made a pre-tax profit of £2.2 billion.

The flooding in Thailand was the biggest single event to dent the finances of 323-year-old Lloyd’s last year. It resulted in £1.4 billion of claims.

The floods left 815 people dead and ravaged 7,700 square miles of farmland. The World Bank estimated the total clean-up costs to be $47.5 billion (£29.9 billion), making the floods the fourth most expensive natural disaster on record.

Lloyd’s also had to pay out £2.4 billion in claims resulting from the Japanese earthquake and tsunami, the earthquakes in Christchurch, New Zealand, and flooding in Queensland, Australia, last year. The twin disasters in Japan cost Lloyd’s £1.2 billion.

Separately, it is understood that the Lloyd’s management is growing increasingly concerned about the amount of business its members are doing outside of its insurance market. Sources say that Lloyd’s regards that growing volume as one of the top three risks it is facing.

Unlike many other insurance brands, Lloyd’s is not a company. It is a market where members join together as syndicates to insure risks.

Much of Lloyd’s business works by subscription, where more than one syndicate takes a share of the same risk. Business is conducted face to face between brokers and underwriters in the Underwriting Room.

The market began in Lloyd’s Coffee House, opened by Edward Lloyd around 1688 in London’s Tower Street.