ANY further major catastrophe will have a dramatic effect on the insurance industry, the head of the Lloyd’s of London market said yesterday.
A run of serious natural disasters since the start of the year, including the earthquake and tsunami in Japan, have depleted insurers’ reserves and another large event could eat into their capital base, Lloyd’s chief executive Richard Ward said.
Industry losses this year already exceed the total 2010 loss and many global insurers and reinsurers have already abandoned their full-year profit expectations after paying multi-million pound claims.
Lloyd’s has recorded losses of about £2.4bn so far this year and Ward warned that “the next big catastrophe could well be a capital event,” if insurers did not raise premium rates quickly. “Prices are dangerously low at present,” he said in a conference speech. “The insurers who write unprofitable business are inevitably the first to collapse when disaster strikes.”
He added that the global scope of recent disasters and their impact on industry and travel showed an increasingly systemic nature to catastrophes. “Risk travels further and faster,” he said.