September 25, 2009 3:00 am
Lloyd's of London saw further rises in the number of smaller claims from business lines exposed to the economic downturn, but said the absence of catastrophes so far this year helped raise pre-tax profit almost 40 per cent in the six months to the end of June.
The market also continued to see only "relatively modest" claims incurred as a direct result of the banking crisis in areas such as Directors' & Officers' liability insurance, said Richard Ward, chief executive.
"We took a conscious decision as a market to reduce exposures to financial institutions after the collapses of Enron and WorldCom in 2001-02," Mr Ward said. "We have seen some notifications come in, but at a level we can handle."
However, the more than 300-year-old market has seen some heavy losses in aviation insurance and reinsurance after a string of accidents, including the mid-Atlantic crash of an Air France plane from Brazil.
Mr Ward said this year's aviation losses would sharpen focus on a market where premium rates had been too low for some time, but that it could be hard to lift those rates when airlines were struggling.
The aggregate pre-tax profit for the Lloyd's market was £1.32bn, up from £949m in the first half of last year, boosted by a doubling in investment returns to £639m as markets recovered in the second quarter. Gross written premiums increased 35 per cent to £13.5bn, up from £9.98bn.
The return on capital within the market was 17.5 per cent. This is better than the 14.7 per cent in the first half of last year, but still below the mid-20s to low-30s percentage figures seen in 2006 and 2007.
Last year, Lloyd's suffered from poor investment returns and heavy claims when hurricanes Gustav and Ike contributed to the third most costly year that catastrophe insurers had experienced.
Mr Ward said Lloyd's remained strongly placed in terms both of capital and its attractions to people looking to off-load risks.
"From this position of strength, we have decided to carry out a rigorous, externally focused review of our strategic goals to make certain we are well placed to take advantage of new opportunities," Mr Ward said. The review is due to be published in the first quarter of next year.
The market has recently gained licences or opened platform offices in Brazil, Portugal and Japan. Mr Ward said the review would consider where else Lloyd's should develop a presence.
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