Lloyds Blames One Time 'Saviours' For £1 Billion Loss

by Carla Johnson, Investors Offshore.com

27 August 2001

Lloyd's of London has revealed that it is facing a loss worth £1 billion and is blaming poor underwriting decisions by the offshore insurance companies that had once rescued the market when it was on the verge of collapse in 1993. The Association of Lloyd's Members (ALM) believes that the big name insurers are more accountable than the individuals and has expressed concerns that the loss combined with a similar deficit in the previous year will damage the company's reputation which is vital in a just recently recovered market.

Statistics released by ALM show that insurance companies based offshore lost on average 17% of their capital in 1998 and they expect to lose just as much in 1999. Individual names lost between 6% to 7%.

ALM chairman Michael Deeny told the Guardian newspaper last week that the figures had showed the performance of insurance companies without a UK-listed parent to be 'abysmal.' He said it was uncertain how the companies, many of which are located offshore in Bermuda, the US or mainland Europe, now viewed Lloyd's. He commented, 'Lloyd's reputation and its rating may still be adversely affected.'

Mr Deeny praised Lloyd's recent decision to obligate underwriters to re-apply for their licences if they appeared in the lower quarter of annual performance tables as he said: 'Lloyd's contains some of the best underwriters in the world, but unfortunately it also has some mediocre ones and it is the aim of the Lloyd's executive to drive low standards out.'

Experts predict that the market will see profits in 2000 and 2001 (accounts are prepared three years in arrears). Generally, confidence among members is high and capital in 2001 is set to increase from £11bn in the previous year to £13bn. The ALM also said it expects profits will be on the up due to an increase in insurance premiums in the last two years and the recent shut down of Independent Insurance which had not only reduced competition but ensured that premiums would be kept to a high level.

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