Lloyd’s insurers are set to cut capacity in 2008 in the wake of worsening market conditions, analysts have predicted.

Widespread reductions are expected between now and November across all lines of business.

This follows announcements by Kiln, Hiscox and Canopius that they intend to cut syndicate capacity for next year.

Richard Gradidge, analyst at Numis insurance, said: “It is likely to be a market-wide decision as rates are gradually coming off in virtually all areas. Syndicates that have less catastrophe exposure are more likely to reduce capacity because rates are most robust in areas that have the most exposure to catastrophes.

“If you look back to this time in 2004 you saw a similar pattern before Hurricane Katrina, with the likes of Hiscox, Kiln and others reducing capacity for 2005. It was only after Katrina that they revised their plans.”

Kiln intends to reduce capacity on its four managed syndicates by 14% to £847m for the 2008 underwriting year, following an increase of 23% in 2007.

The initial business plan of Canopius for 2008 includes a decrease in its stamp from £450m to £400m. This is in line with a reduction announced by Hiscox.

Analysts said the weaker US dollar used by Lloyd’s for syndicate planning purposes also accounted for a material part of the reduction.

A spokesman for Lloyd’s said: “While it is for each market firm to set its own capacity, we work closely with them throughout the year to ensure disciplined underwriting, taking a good look at their business plans and challenging their assumptions.

“As part of this process, we share our view of optimal capacity every year. This will become even more robust as we enter a soft market, and we will continue to work with firms to ensure the focus remains on making a profit rather than chasing market share.”