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Following the second costliest year for catastrophes on record for the insurance industry, Lloyd’s today announced a loss of £516 million (US$800 million) for 2011.
Lloyd’s incurred total net claims of £12.9 billion (US$20.6 billion) during 2011, including £4.6 billion (US$7.4 billion) of catastrophe claims, making it the largest catastrophe claims year on record for the 324-year-old insurance market.
This follows a series of major catastrophes including flooding in Australia in January, the second earthquake in New Zealand in February, the Japanese earthquake and tsunami in March and the floods in Thailand beginning in July. Total claims from natural catastrophes for the insurance industry in 2011 were US$107 billion .
Lloyd’s Chief Executive Richard Ward said: “Make no mistake, 2011 was a difficult year for the insurance industry. Given the scale of the claims, a loss is unsurprising but it reflects what we’re here to do – help communities and businesses rebuild after disaster.
“It is also reassuring that, despite this loss, our financial strength has been maintained. It’s testament to Lloyd’s robust oversight and professionalism in the market today.
“However I am disappointed that, given the exceptional level of catastrophes in 2011, insurance rates have not responded more positively. These events demonstrate the need for the industry to show discipline in terms of pricing.”
Chairman of Lloyd’s John Nelson said: “The Lloyd’s market has emerged from its largest catastrophe year ever in a strong position. Our strong capital position is unchanged and we were able to make a profit in the second half of the year despite the floods in Thailand and continuing low investment returns.
“2012 remains challenging for insurers with tough economic conditions globally. It is vital that the market continues to take a disciplined approach to underwriting.”
Richard Ward would not be the first CEO at Lloyd’s to complain that managing agents could be in danger of chasing premium instead of maintaining discipline and holding rates up. Ever since the creation of the Franchise Performance Directorate, successive CEOs have banged the drum to ensure underwriters play a more sensible game. But with international markets increasingly competitive it will be interesting to see what reaction underwriters take throughout 2012; particularly if this year’s North American hurricane season is more benign than average.