Insurers' profits are set to take a downturn on the back of 2007's savage weather

Legal and General became the first insurer to report losses on the back of 2007’s extreme weather.

The company made a £38m operating loss for its general insurance business in the first half of the year, compared to a £2m profit in the same period in 2006.

The performance of its household book was to blame, producing a £52m operating loss. In the previous year, the book managed a small profit of £2m.

Windstorm Kyrill in January resulted in £8m worth of claims for L&G, while the June floods gave rise to £40m of claims net of reinsurance, it said.

L&G will not be the only insurer reporting personal lines losses or severely affected results on the back of the weather events this year.

Norwich Union and Royal & SunAlliance, both of which will publish their half-year figures at the beginning of August, have already given an indication of their expected exposures to the June floods.

Royal & SunAlliance estimates the floods in the north of England will cost it £55m, net of reinsurance recoveries, in claims. Norwich Union put its exposure at £175m.

Both companies, however, remained optimistic that they would hit their combined ratio target, despite the inevitable impact on their results.

Other insurers are also counting the cost. AXA, for instance, predicts its claims bill from the June floods to be £78m, while Royal Banks of Scotland Insurance put its exposure at £100m.

But as the claims roll in from last weekend’s floods, these number are set to increase further.

With the commercial market still soft, 2007 is unlikely to be a bumper year for the UK insurance industry.

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