Lloyd's is being accused of underestimating its losses from the September 11 terrorist attacks by £400m.
Ratings agency Fitch today (Wed 26) said the market stands to lose £1.7bn, or 15.4% of its capacity.
Fitch published its figures after Lloyd's forecast the attacks would cost it £1.3bn, or 12% of its capacity.
Fitch last week downgraded Lloyd's financial strength rating from A+ to A- and today warned the rating was liable to fall further if the losses turn out to be greater than expected.
Fitch argued in a statement that losses from large catastrophes “have always been understated.”
It warned Lloyd's faces greater losses if reinsurers go bust, leaving the market exposed to irrecoverable reinsurance.
It also said Lloyd's faced a “major issue” with liquidity and said: “In particular, one area of concern to the agency is Lloyd's requirement to hold 100% of outstanding claims in trust for reinsurance business it underwrites in the United States.”
Lloyd's central fund could come under pressure and its solvency margin would inevitably be reduced, Fitch said.
