The loss, announced today by Lloyd’s of London, shows just how severe the second costliest year for catastrophes on record for the insurance industry actually was. Lloyd’s announced a loss of £516 million ($822 million) for 2011 – a large, but in retrospect a comparatively low, figure, given the extent of the claims.
Lloyd’s stated that it had incurred total net claims of £12.9 billion ($20.55 billion) during 2011, including £4.6 billion ($7.33 billion) of catastrophe claims, “making it the largest catastrophe claims year on record for the 324-year-old insurance market.”
The claims from the world’s global catastrophes included “flooding in Australia in January, the second earthquake in New Zealand in February, the Japanese earthquake and tsunami in March and the floods in Thailand beginning in July.”
Lloyd’s figures for losses from natural catastrophes for the insurance industry in 2011 were slightly lower than those from Swiss Re, at $107 billion, compared to $110 billion.
Lloyd’s Chief Executive Richard Ward stated: “Make no mistake, 2011 was a difficult year for the insurance industry. Given the scale of the claims, a loss is unsurprising but it reflects what we’re here to do – help communities and businesses rebuild after disaster.
“It is also reassuring that, despite this loss, our financial strength has been maintained,” he added. “It’s testament to Lloyd’s robust oversight and professionalism in the market today.
“However I am disappointed that, given the exceptional level of catastrophes in 2011, insurance rates have not responded more positively. These events demonstrate the need for the industry to show discipline in terms of pricing.”
Lloyd’s Chairman John Nelson pointed out: “The Lloyd’s market has emerged from its largest catastrophe year ever in a strong position. Our strong capital position is unchanged and we were able to make a profit in the second half of the year despite the floods in Thailand and continuing low investment returns.”
He also noted that “2012 remains challenging for insurers with tough economic conditions globally. It is vital that the market continues to take a disciplined approach to underwriting.”
Lloyd’s report listed the following financial highlights:
• Loss before tax of £516 million ($822 million); 2010: profit of £2.195 billion ($3.5 billion).
• Combined ratio of 106.8 percent (2010: 93.3 percent) – in line with an estimated average of: 108 percent for US property and casualty insurers; 107 percent for US reinsurers; 105 percent for Bermuda insurers and reinsurers, and 101 percent for European insurers and reinsurers.
• Total resources of the Society of Lloyd’s and its members at £58.870 billion (US$93.786 billion); 2010: £55.230 billion ($87.973 billion).
• Central assets at £2.388 billion ($3.803 billion); 2010: £2.377 billion ($3.786 billion).
• Investment return of £955 million ($1.521 billion); 2010: £1.258 billion ($2.003 billion).
• Prior year reserve surpluses of £1.173 billion ($1.867 billion); 2010: £1.016 billion ($1.618 billion).
Source: Lloyd’s of London