The Lloyd's Central Fund levy is expected to double to 1% of capacity in 2006.

ABN-Amro, which published its insurance report 2005: a cracking year? last week, said the rise would help cover the £226m fall in total funds caused by the WTC reinsurance dispute with Swiss Re and six reinsurers.

It said: "The Central Fund levy is expected to double to 1% for 2006 and it is likely to remain at this level for 2007/8. This increase is due to the lower than originally expected settlement (£152m) in the dispute between Lloyd's and the six reinsurers of the Central Fund.

"As a result, at £575m, total funds are some £226m lower than previously reported."

If there are no changes to other charges, the bank said, "central costs of members will rise to 2.25% of capacity, higher than 2004/5", a charge that companies must factor in and "will become more relevant as profits start to reduce".

Overall, the report said that rates were holding but the underwriting cycle was on a "downward" trend. But the bank has raised its target prices on Brit, Amlin, Catlin, Hiscox and Wellington and believed SVB has "turned the corner" and was undervalued as a stock.

A Lloyd's spokeswoman said: "We are expecting that the Central Fund levy will increase from 0.5% of capacity to 1% of capacity for 2006, pending Council approval in September. We always want to maintain an optimum level of assets for the market both in terms of capital efficiency and overall rating security.

"This is also to ensure that we are not tying up more capital than necessary. The market has been consulted about this and thinks it is a reasonable move."