September 26, 2001 by Canadian Underwriter
Lloyd’s of London, which has been accused of dragging its heels in posting an estimate of losses from the U.S. terrorist attacks of September 11, has come in with a US$1.9 billion figure. The loss reflects information from more than 100 affected syndicates and involves thousands of members, both corporate and individual. The US$1.9 billion is equivalent to 12% of the market’s 2001 capacity.
Chairman Sax Riley defends the process, which has taken more than two weeks and involved an examination of Lloyd’s members’ reinsurance arrangements and solvency situations. “Arriving at an estimate for a marketplace as complex as Lloyd’s was always going to take longer than for a single insurance company – especially for a situation which is still changing rapidly.”
Riley also fended off speculation that the losses would seriously challenge the market’s solvency. “While a figure of this size will have a significant impact on the Lloyd’s market, the market’s strong capital base will absorb this loss.”
He adds that the losses will further impact the already hardening insurance market. “Clearly there will be a contraction of global insurance capacity which will fuel the premium rate rises we’ve been seeing since the last quarter of 2000.”
He did not speculate on whether the Lloyd’s central fund would be used to cover any of the losses, although it is outlined as one of three possible sources of claims payment funds, along with individual syndicate capital and member funds deposited with Lloyd’s.