Moody's forecasts £5bn losses at Lloyd's

Lloyd's will lose around £5bn for the 2000 and 2001 years of account, according to Moody's.

However it said that 2002 should offer a profit potential of over £1bn.

Moody's respective loss predictions for the 2000 and 2001 years of account are now £2.4bn and £2.6bn - £430m and £875m higher than Lloyd's own forecasts for the losses in these years.

Moody's vice president Dominic Simpson said: "Moody's currently expects around 80% and 70% of syndicates underwriting in 2000 and 2001 respectively to be loss-making.

"In addition, we also forecast losses for each of the main Lloyd's sectors in both years, with the exception of motor, which is expected to be profitable in 2001."

The forecast losses for 2000 and 2001 are larger due to the impact of the World Trade Centre losses it said.

For the 2001 account the disaster exacerbated the losses, with increased reinsurance costs and retention levels weighing on profitability.

Nonetheless, the WTC disaster has had the effect of acting as a catalyst for significant improvements in rates and terms and conditions.

Simpson added: "As a result, in 2002 Lloyd's can look forward to the prospect of a decent profit with genuine optimism."