Lloyd’s Confirms S&P WTC Gross Loss Figure

October 24, 2001

Lloyd’s confirmed an earlier report from Standard & Poor’s that gross losses from the events of September 11 will be around £5.4 billion ($7.7 billion). The net loss estimate of £1.3 billion ($1.85 billion) after reinsurance recoveries remains unchanged.

“The figure, reached following discussions with Lloyd”s management, is considered broadly consistent with Standard & Poor’s current estimate of the global industry loss,” said a S&P press release. It’s considerably lower than the £7 billion ($10.1 billion) figure calculated by some analysts, but is likely to be more accurate. Lloyd’s spokesman Adrian Beeby indicated several weeks ago that Lloyd’s provides otherwise private financial information to S&P and A.M. Best, but not usually to other analysts.

S&P Director Stephen Searby commenting on Lloyd’s share of the losses in the global reinsurance and U.S. surplus lines markets said that , while still uncertain, any increases should be in line with the size of the industry loss. He also indicated that S&P was confident in the quality of Lloyd’s reinsurance, and confirmed that “Based on data provided by Lloyd’s syndicates 90% of reinsurance recoveries are rated ‘A’ or higher,” as Lloyd’s has consistently maintained.

S&P also noted the steps taken by U.S. regulators to temporarily lower the requirements for Lloyd’s transfer of cash into security funds from 100 percent of projected losses to 60 percent, which eases the liquidity burden it faces. Searby cautioned, however that the funding requirement “nevertheless remains significant.”

Lloyd’s has already increased the monthly premium levy on its syndicates to 2 percent for the next three years in order to strengthen its central fund, and practically all syndicates have issued a cash call to their members, requesting the deposit of additional funds averaging around $60,000 (See IJ Website October 18).

S&P will continue to monitor the situation and Lloyd’s will continue on CreditWatch/Negative until “greater clarity relating to its claim estimates and reinsurance recoveries is available, when its liquidity issues are resolved, and when cash calls are met by capital providers,” Searby added.

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