Lloyd's Of London Warns Of 'perfect Storm' Threat To Insurance Market

[interestrateripoff]

http://www.guardian.co.uk/business/2010/may/18/lloyds-insurance-disasters-profit-warning

The head of the Lloyd's of London insurance market warns today that one more major disaster could plunge the insurance industry into the red this year.

Richard Ward will tell a gathering of insurance chiefs that the industry is facing the toughest year he can remember, the Guardian has learned.

"It isn't overstating the situation to say that the insurance industry is facing a potential perfect storm this year," Ward says in his keynote speech at the Insurance Day London Summit.

Speaking as the industry braces itself for the US hurricane season, Ward says: "That is a significant challenge for the industry worldwide but it is a storm we can see coming and we can prepare for. Insurers who keep their discipline and don't chase risky short-term profit will stand the best chance of long-term survival."

The insurance industry is forecasting a loss of up to $3.5bn (£2.4bn) from the growing oil spill in the Gulf of Mexico. This will be the biggest loss in the energy market since the explosion of the Piper Alpha rig in the North Sea in 1988, which led to a spiral of reinsurance losses and cost Lloyd's £8bn between 1988 and 1992.

Swiss Re has put total insured losses from the oil spill at $1.5bn-$3.5bn, and its own loss at $200m. Lloyd's will issue its own estimate later this month.

Lloyd's recorded record profits of nearly £4bn last year, with £1.4bn of underwriting profit. However, Ward warns: "Just one serious catastrophe could potentially wipe out the entire underwriting profit from last year."

Hurricanes Ike and Gustav, which wreaked havoc on the Caribbean and the southern US in 2008, cost the industry $24bn. It was one of industry's worst years with 137 natural catastrophes and 174 man-made disasters. By comparison, the total cost of Hurricane Katrina is estimated at between $100bn and $225bn.

Already this year catastrophes such as the Chilean earthquake and the oil spill in the Gulf of Mexico, combined with low investment returns and weakening rates, will have a "very significant" impact on the insurance industry.

Several insurers, including Amlin, the largest group in Lloyd's, have warned that the oil rig disaster will raise premiums. Much of the losses will end up being paid by reinsurance companies, which cover the losses made by direct insurers – triggering reinsurance price hikes that will be passed back to the insurers, who may then pass them on to clients.

Excellent, so we only need another major disaster and the insurance industry will be in trouble.

Thanks god there's tons of money.

[lurker07]

It's the close-your-eyes-and-cross-your-fingers recovereh.

[Guest KingCharles1st]

Oh Shit- we need Gordon back with his amazing money printer

[Tankus]

Maybe if that volcanic ridge next to the logwhatsitsstuipidname volcano in iceland kicks off , as its statistically supposed too , will be the final nail.

Why would anyone be a name these days ? , couple of good years , and then maybe you loose your house .!

[SaintJay]

it will hurt them, but not cripple them. They have similar bonuses to bankers, but these are dependent on results.

No profit, no bonus. One place I worked - average bonus (across all levels) was about 40% of gross annual salary.

The following year - zilch. No bonus. This is scaremongering by the Guardian. Nowt to see here, move along.

* I'm not including AIG in this.