Lloyd's ups Sept. 11 loss forecast
Raised by 50% to £1.9B: Insurer moves to calm doubts it can absorb costs
Reuters, with files from Dow Jones
LONDON - The Lloyd's of London insurance company yesterday raised its estimate of losses stemming from the World Trade Center attacks by nearly 50% to £1.9-billion ($4.28-billion), but said it could still cope with the claims.
The 300-year old insurance company -- facing its biggest single loss from the disaster -- had originally put its losses from the Sept. 11 attacks at £1.3-billion, but like many other major insurers has had to raise its forecast.
The scale of the losses has prompted concerns about Lloyd's ability to absorb them, after huge losses in the 1990s from hurricanes, floods and asbestos-related claims.
Sax Riley, Lloyd's chairman, said the company's survival was not in question.
"Anyone searching these figures for signs of Lloyd's demise will be disappointed," Mr. Riley said .
He said Lloyd's could manage its losses from Sept. 11 and these new projections did not change that position.
The World Trade Center catastrophe will be the world's costliest in insurance terms, with claims expected to reach up to US$70-billion -- over three times the US$20-billion cost of Hurricane Andrew in 1992, previously the world's most expensive disaster.
The world's largest reinsurers, Munich Re and Swiss Re, have already nearly doubled their initial estimates of the cost of claims from the attacks.
Insurers have been hiking premiums substantially in almost all lines of business.
Lloyd's has already seen some of the benefit of the upturn in rates.
"The 40% increase in premium income written for this year, and the steep rate rises that have been seen since September, mean our financial performance is turning the corner rapidly," Mr. Riley said.
Lloyd's said the main reason for the increase was new property claims and greater reinsurance exposure, as other insurers revised their loss estimates upward.
Lloyd's is also a major reinsurer, selling insurance policies to help other insurers spread their risks.
The insurance market said the World Trade Center claims would push it to a loss of £1.49-billion for 2000 -- more than double the £694-million it predicted in August.
Lloyd's reports its results three years in arrears because some insurance claims take many months or years to settle.
The insurer said £650-million of the WTC loss would be included in its 2000 results, which will be finalized in 2003.
The balance of the WTC loss will fall in 2001.
Lloyd's put its gross losses from the Sept. 11 attacks, excluding expected recoveries from reinsurance contracts, at £5.7-billion, up from its initial estimate of £5.4-billion.
Adrian Beeby, a Lloyd's spokesman, said the company had indeed factored increased reinsurance failure into its latest figures, "but it's not a big element of it."
"It adds additional losses into the Lloyd's system," said David Wharrier, an analyst at ratings agency Fitch.
Lloyd's overall market losses not only put further pressure on Lloyd's central fund, he said, but it was "very likely" Lloyd's would also have to call on a key reinsurance policy it has with six major insurers to boost its liquidity. This pays out when losses in the central fund exceed £100-million in any one year.
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