Reinsurance broker Guy Carpenter & Co. says the Lloyd’s market should see continued improvement in 2004 on the back of market reforms and underwriting discipline. In its second annual review of Lloyd’s, the impressive results of 2003 are recounted, including BP 1.9 billion in profits last year. At the same time, reserves were strengthened by BP 545 million. Premiums were a record high in 2003, with gross written premiums hitting BP 16.4 billion, while the market still saw its combined ratio drop, coming in at 90.7%. While market capacity was BP 15 billion for 2004, the report notes, “capacity and utilization are expected to shrink from this peak level over the next few years”, given some softening rate conditions already being witnessed. 2003’s results must also be seen in the context of the low level of natural catastrophe losses, a trend which cannot be expected to continue indefinitely, notes Geoffrey Bromley, president of Non-Americas operations for Guy Carpenter. “It is also noteworthy that Lloyd’s is expecting to report a cumulative deficit of almost BP 1.5 billion over the period 1993 to 2003, on the traditional three-year accounting basis. Nonetheless, he sees market reforms including the new Franchise Board as positive moves to reduce the volatility of the market. As the industry moves into a soft market phase, he says this will be the first true test of the board’s ability to enforce underwriting discipline amongst syndicates. Other highlights of 2003 include the expansion of the Central Fund by 49% to reach BP 711 million, the removal of the 2% premium levy imposed after 9/11, and the reduction of members’ central charges to 1.75% of capacity in 2004, from 3.25% the year prior. “Strong management at the center is partly responsible for the turnaround in fortunes,” the report notes. “Strict investment guidelines have protected Lloyd’s from recent equity market volatility and Equitas insulates the market from the growing asbestosis problem.” This has put Lloyd’s in an enviable position to capitalize on the recent hard market compared to its peers.