Lloyd’s Reports Worst First-half Losses In Its History

Lloyd’s announced its costliest six-month period in the history of the 323-year-old market today. The interim loss before taxes was tallied at $1.12 billion for the six-month period ending June 30, 2011.

The results reflect record-setting global catastrophe claims figures, which through just six months, according to recent figures from Swiss Re, already ranks 2011 as the second-costliest year for catastrophe coverage.

To counteract this, Lloyd’s also noted a positive return of $883 million on investments. Overall, this still resulted in an unfavorable combined ratio of 113.3 percent for Lloyd’s, however, this still compares well with the Bermudian reinsurance market’s combined ratio of 117 percent as well as the U.S. reinsurance industry’s ratio of 116 percent.

“These are tough times for the insurance industry, but we are well positioned to handle them,” said Lloyd’s Chief Executive Richard Ward. “Despite incurring $10.8 billion in claims from the costliest first-half on record, Lloyd’s entered the second half of the year with $92 billion in net assets to support our business and pay claims. However, while interest rates are low and equity markets are volatile, we can’t rely on investment income to subsidize our underwriting, we must decline under-priced risks.”

The UK branch of KPMG consulting firm also released a statement regarding first-half losses, however, the report declares optimism for the London insurance market. The report, titled “General Insurance Performance Benchmarking Survey,” analyzes nine London market insurers, all of whom “were dominated by significant catastrophe claims, soft rating conditions and deflated investment returns.” Yet optimism persists, claiming the market remains robust in spite of the record claims suffered, as insurance companies “appear to have enough capital to absorb losses” and bounce back, according to Mark Winlow, UK head of general insurance at KPMG.

The report predicts the rest of 2011 will consist of recovery efforts from insurers, consisting of “consolidation, premium increases and a renewed focus on cost management for the sector.”