Lloyd’s chief executive Richard Ward has warned insurers that rates need to rise "significantly" because the next big natural catastrophe will hit the industry’s capital, not just earnings.
Ward also said the Lloyd's market's 'lucky streak' in avoiding Atlantic Hurricane claims could come to an end.
Speaking at a conference shortly after Lloyd’s announced claims in the region of £2.4bn from natural catastrophes in the first quarter, Ward praised the insurance market for its ability to cover these losses.
“Recent events, perhaps even more than the financial crisis have demonstrated in stark detail why businesses need insurers who can pay large sums without any threat to their solvency or ability to trade forward. Lloyd’s has delivered that," he said.
However, he warned that these claims have occurred in just one quarter of the year and that they already exceed total losses for the whole of 2010, adding: “the next big catastrophe could well be a capital event.”
The weathervane for Lloyd’s profits is traditionally the Atlantic Storm season, which starts next month.
“For the last two years we have been lucky,” said Ward. “Despite some highly active seasons – last year 12 hurricanes formed - none made landfall in the US. At some point our luck will run out."
In calling for rates increases, he argued that it was the responsibility of both underwriters and brokers to ensure pricing reflected the risk.
“Rates should rise," he said. "Prices are dangerously low at present. Clients may think they are getting a bargain.
"But the fact is that they are buying security. The insurers who write unprofitable business are inevitably the first to collapse when disaster strikes”.
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