Lloyd’s sees US$4.5bil losses from Harvey and Irma

Although losses from natural catastrophes had been low in recent years, including in the first half, that is set to change in the second half of the year, Lloyd

LONDON: Lloyd’s of London expects net losses of US$4.5bil from hurricanes Harvey and Irma, which analysts said would eat into the insurer’s capital and hit its profitability.

Although losses from natural catastrophes had been low in recent years, including in the first half, that is set to change in the second half of the year, Lloyd’s chief executive Inga Beale said following yesterday’s results.

“There was limited major claim activity in the first half. There’s a very different second half emerging – it’s not only the hurricanes but we’ve got the Mexican earthquakes, floods in Asia, typhoons in Asia,” Beale told Reuters.

“The hurricane season is still in play, earthquakes can happen at any time,” Beale said as Lloyd’s reported a 16% profit fall in the first half of 2017.

Lloyd’s 80-plus syndicates had already paid out more than US$160mil in claims from Harvey and more than US$240mil from Irma, Beale said. The US$4.5bil net loss estimate was based on modelling of “known exposures”, she added.

“Given that the Lloyd’s of London market typically produced earnings of £2.1bil to £3.5bil, it is highly likely that the market faces a capital loss,” analysts at investment bank Jefferies said in a note.

Modelling firm RMS estimates total insured losses from Harvey and Irma of up to US$80bil.

Meanwhile, Beale said it was too early to assess losses from Hurricane Maria, which devastated Puerto Rico last week and which some analysts had predicted would lead to greater insurance losses than Harvey and Irma.

Lloyd’s made £1.22bil (US$1.63bil) in pre-tax profit in the six months to the end of June, down from £1.46bil a year earlier. — Reuters