Lloyd’s pushed into red after a year of disaster

LLOYD’S of London has suffered the second-worst catastrophe losses in its 324 year history, paying out a record £4.6bn in disaster-related claims during 2011.

Earthquakes in Japan and New Zealand combined with floods in Australia and tornadoes in America to create a horrific year for underwriters, dragging the market into the red with a £526m loss, and taking total payouts for the year to £12.9bn.

Despite this Lloyd’s was able to boast that its balance sheet was not weakened by the catastrophes.

“2011 has been a really good stress test for whether the system works. If what had happened last year had happened in the 1990s the result may have been very different,” chairman John Nelson told City A.M.

“Lloyd’s produced a loss of just over £500m and when you think that we incurred claims of £13bn in the year then relatively speaking it’s a pretty good result.”

The results, which aggregate the financial performance of 80 competing insurance syndicates, rank as the largest loss since the record–breaking payout that followed the terrorist attacks of 2001.

Weak investment yields, reflecting rock-bottom interest rates and strong demand for high-quality government bonds, also took their toll on Lloyd’s last year, with total returns on its portfolio falling 24 per cent to £955m. Although the market made a loss the board still enjoyed substantial bonuses. Chief executive Richard Ward saw his pay hit £1.44m, partly thanks to a £752,000 performance–related reward, while finance director Luke Savage’s £338,00 bonus allowed him to take home £893,000.