The softening cycle has hit Hardy Underwriting, which has announced lower than expected year-end results. Profit before tax almost halved to £8m from £14.4m a year earlier.

The company said the total had been offset by the 2004 hurricane season and an increase in its reserves for 2005. Hardy finance director Jamie MacDiarmid said the company had become aware of a "potential loss" in a new European bank account.

MacDiarmid said Hardy had reserved in full its £2.3m share of the £180m payout anticipated by insurers. In its Lloyd's Syndicate 382 combined ratio was offset by the hurricane season, rising from 81.2% in 2003 to 93% in 2004.

The 2004 year of account also suffered from a gain in reserves and huge losses stemming from the hurricane season. The account made a £4.5m loss compared with a profit of £1.9m in 2003.

The 2002 year of account closed with a profit of 19.7% of capacity, being 30.8% of written income.

MacDiarmid told Insurance Times: "The balance of accounts has gone very well, national catastrophe losses have dampened profit but we are in a strong position to move forward."