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Lloyd's of London expects $4.5 billion losses from Harvey, Irma

The hurricane season is still in play, earthquakes can happen at any time

Reuters  |  London 

Hurricane Irma, British Virgin Islands
This Sept 8, 2017 photo shows storm damage in the aftermath of Hurricane Irma in Virgin Gorda's Leverick Bay in the British Virgin Islands.

Lloyd's of expects net losses of $4.5 billion from and Irma, which analysts said would eat into the insurer's capital and hit its profitability.

Although losses from have been low in recent years, including in the first half, that is set to change in the second half of the year, Lloyd's chief executive Inga Beale said following Thursday's results.

"There was limited major claim activity in the first half. There's a very different second half emerging - it's not only the but we've got the Mexican earthquakes, in Asia, typhoons in Asia," Beale told Reuters.

"The hurricane season is still in play, can happen at any time," Beale said as Lloyd's reported a 16 percent profit fall in the first half of 2017.

Lloyd's 80-plus syndicates have already paid out more than $160 million in claims from and more than $240 million from Irma, Beale said. The $4.5 billion net loss estimate was based on modelling of "known exposures", she added.

"Given that the Lloyd's of market typically produces earnings of 2.1-3.5 billion pounds, it is highly likely that the market faces a capital loss," Jefferies analysts said in a note.

Modelling firm RMS estimates total insured losses from and of up to $80 billion.

Meanwhile, Beale said it was too early to assess losses from Hurricane Maria, which devastated last week and which some analysts have predicted will lead to greater insurance losses than and

Lloyd's made 1.22 billion pounds ($1.63 billion) in profit before tax in the six months to the end of June, down from 1.46 billion pounds a year earlier, although Beale said part of the drop in profit was related to

Insurance rates have been falling for the world's largest specialist insurance market and other insurers for several years due to strong competition.

Lloyd's return on capital worsened to 8.9 pct from 11.7 pct, due to pressure on returns from low

Gross premiums rose to 18.9 billion pounds from 16.3 billion pounds last year, and its combined ratio improved to 96.9 pct from 98 pct in 2016. A combined ratio is a measure of underwriting profitability, with a level below 100 percent indicating a profit.

Jefferies said recent meant that a combined ratio for the year of 112.5 percent for Lloyd's "is now a possibility", indicating higher underwriting losses than 2011, which it said was "the last major catastrophe year".

Lloyd's was on track to open its planned subsidiary in Brussels by the middle of next year, Beale said, adding the new hub would employ "tens" of people and the firm would be submitting its formal license application "very shortly".

More than 20 insurers have announced plans for hubs in the event that loses access to the single market as a result of its departure from the

First Published: Thu, September 28 2017. 16:19 IST
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