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Lloyd's of London hit by record catastrophe claims Lloyd's of London hit by record catastrophe claims
(about 6 hours later)
Lloyd's of London, the 324-year-old insurance broker, made a £526m loss last year after paying out the largest catastrophe claims on record. Lloyd's of London made a £516m loss last year after paying out the largest catastrophe claims on record.
The venerable insurance broker, which operates out of Richard Rogers's famous "inside-out building" in the City, paid out £4.6bn in disaster claims after earthquakes in Japan and New Zealand, storms in the US and floods in Thailand and Australia. The 324-year-old insurance market, which operates out of Richard Rogers's famous "inside-out building" in the City, paid out £4.6bn in disaster claims afterearthquakes in Japan and New Zealand, storms in the US and floods in Thailand and Australia. Total catastrophe claims for the global industry reached $107bn (£67bn) last year, according to insurer Aon Benfield.
Total catastrophe claims for the global industry reached $107bn (£67bn) last year, according to insurer Aon Benfield. The "unprecedented" series of natural disasters forced up Lloyd's total pay out to £12.9bn, or £1.07 for every £1 paid in premiums last year. The Thai floods, in October, were the biggest disaster for Lloyd's in term of payouts last year, with total claims estimated at £1.4bn.
Overall payouts totalled £12.9bn at Lloyd's, meaning it paid out £1.07 for every £1 received in premiums. This dragged it to a £516m pre-tax loss for the year to the end of December, compared with a £2.2bn profit in 2010. Richard Ward, Lloyd's chief executive, said: "Seven industrial parks the size of Birmingham - and they remained underwater for a couple of months." He said the Thai floods were a "double whammy" for Japan because 80% of the buildings were owned by Japanese technology companies, many of which had transferred production to Thailand following the country's devastating earthquake and tsunami in March.
The figure represents the broker's biggest full-year loss since the September 11 attacks on the twin towers in 2001, which dragged the market of 80 insurance syndicates to a £3.1bn loss. Ward said £1.2bn of tsunami payouts were lower than for the Thai floods because Japanese companies tend to insure their businesses with local insurers and, "worryingly" for the people of Japan, a lot of properties were not insured at all.
"Make no mistake, 2011 was a difficult year for the insurance industry," the Lloyd's chief executive, Richard Ward, said in a statement. "Given the scale of the claims, a loss is unsurprising, but it reflects what we're here to do: help communities and businesses rebuild after disaster." The scale of the payouts dragged Lloyd's to its biggest full-year loss since the 11 September attacks in 2001, which led to the market of 80 insurance syndicates reporting a £3.1bn loss. In 2010 the company made a £2.2bn profit.
In August, Lloyd's reported a first-half loss of £697m after what it described as its "costliest six months on record". "Make no mistake, 2011 was a difficult year for the insurance industry," Ward said. "Given the scale of the claims, a loss is unsurprising, but it reflects what we're here to do: help communities and businesses rebuild after disaster."
Its chairman, John Nelson, said the market was still in a strong financial position, but warned that 2012 would be another challenging year. "Our strong capital position is unchanged, and we were able to make a profit in the second half of the year despite the floods in Thailand and continuing low investment returns," he said. He said the size and stability of Lloyd's market structure, which allows underwriters and brokers to operate under the protection of its £2.3bn central fund, had enabled the company to absorb the "pretty spectacular" £12.9bn payout.
"We can take a punch to the solar plexus, and get up and fight again," said Luke Savage, Lloyd's finance director. "The market is designed to withstand one, two, three [disasters] it's not often they all come at once.... We're here to take risks."
Its newish chairman, John Nelson, said the market was still in a strong financial position, but warned that 2012 would be another challenging year. "Our strong capital position is unchanged, and we were able to make a profit in the second half of the year despite the floods in Thailand and continuing low investment returns," he said.
Lloyd's also announced that it had given Ward, and his executive team, pay rises of up to 20% for 2012. Ward's basic pay increased from £556,000 to £668,000, but his potential bonus was reduced from 150% of his salary to 100%. Last year he was paid £1.4m, including £556,000 salary and a £752,000 bonus.
Savage's pay was increased by 15% to £518,000, while his maximum bonus fell from 75% of salary to 50%.
Ward welcomed the chancellor's promise to reform the tax regime for overseas corporate earnings. In last week's budget, George Osborne again pledged to reform the controlled foreign companies (CFC) tax rules, with legislation expect to be put forward in the next few weeks. "It is tremendously positive for London," Ward said. "[The UK] is starting to look like a very attractive place to do business again thanks to No10 and No11."