Lloyd's of London is set to make losses of more than £3bn between 1998 and 2000, according to ratings agency Moody's.

It says respective losses for 1998, 1999 and 2000 would be £1.1bn, £1.2bn and £700m.

The agency says: “The 1999 account is anticipated to be the bottom of the current downcycle and, although prospects for 2000 seem better, a loss is currently forecast, suggesting that there is no guarantee of profit for 2001.”

Moody's says a combination of “extremely poor market conditions and, more recently, adverse loss experience,” has led it to forecast respective bottom line, pure year losses of -12.2% and -14.1% for 1998 and 1999.

After taking into account releases from previous years the forecasts improve to respective losses for 1998 and 1999 of -10.7% and -12.6%.

Mark Hewlett, managing director of Moody's European insurance division said: “The losses forecast show the severity of this current downcycle that has affected insurance and reinsurance companies worldwide.”

He added: “We continue to believe that a significant hardening in rates will need to occur if the 2001 year of account is to return to a profit.”

A spokeswoman for Lloyd's said: “As with everyone else, we are experiencing a difficult environment.”

She said Lloyd's agreed with Moody's that 1999 was the bottom of the cycle, with two Turkish earthquakes, windstorms in Europe and a number of plane crashes.

Lloyd's expects to release its forecast quarterly returns towards the end of this month.