Following a review by all of its 44 managing agents, who operate its 62 active syndicates, Lloyd’s issued a bulletin indicating that its preliminary estimate of losses from Hurricane Katrina are approximately 1.4 billion pounds ($2.54 billion).
Lloyd’s said it “extends its sympathy to all the individuals and communities affected by Hurricane Katrina and its aftermath.” The announcement said that following Katrina’s destruction, Lloyd’s has “focused on two immediate priorities. Firstly, providing proper assistance to policyholders facing very difficult circumstances. Secondly, assessing the overall financial impact on the Lloyd’s Market.”
Lloyd’s explained that it “has developed a series of Realistic Disaster Scenarios to ensure the market can withstand major catastrophes. One of these models the market’s exposure to a Gulf of Mexico windstorm. The financial impact of Hurricane Katrina on Lloyd’s is consistent with that model.” It compared the losses from Katrina to the four hurricanes that struck Florida last year. They resulted in a net loss to the Lloyd’s market of 1.3 billion pounds ($2.37 billion).
“It should be stressed that it will not be possible, for some time, to have a precise view of the ultimate insured loss because this is a complex catastrophe, the full extent of the damage is unknown and the loss is still ongoing,” the bulletin said. “The provisional estimate is based on an initial analysis of the assessments made by the managing agents, who “have drawn on the limited information they have so far of their exposure, and on previous work to model exposure to major catastrophes.
“The financial position of the Lloyd’s market is strong. The impact of major catastrophes is modeled to ensure that the market is able to absorb losses, and in the normal course of business managing agents assume a certain level of major catastrophe loss in their financial planning.”
Lloyd’s added that based on current information, it “believes any impact on the Central Fund would be immaterial, and there is nothing to suggest that any syndicate would not be able to trade forwards as a direct result of Hurricane Katrina.”
The announcment also indicated that Lloyd’s will continue to give further updates as more information becomes available.
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