Moody's has forecast that Lloyd's could produce up to £3bn profit over the 2002 and 2003 years of account.
Moody's originally forecast that the 2000 and 2001 years of account would produce losses of around £2.3bn and £2.2bn respectively.
Moody's stated that the 2000 year of account was affected by weak market conditions, combined with World Trade Centre (WTC) losses.
Moody's said that the 2001 year was dominated by the WTC impact. However, with a number of WTC related underwriting issues potentially taking years to resolve the outcome of the 2001 year is subject to uncertainty.
However it said the year would benefit from the business recovery post-WTC, a prime example being Aviation, which saw substantial rate increases. The ratings agency added that WTC had masked a year in which market conditions had already begun to improve.
However the ratings agency has now increased its profit forecast for 2002 to £1.6bn.
Managing director of Moody's European Insurance Division, Mark Hewlett, said: "Lloyd's in the previous up cycle showed its ability to rebound from a period of substantial losses, and history is likely to repeat itself.
"Most business lines underwritten at Lloyd's have seen a considerable improvement in pricing as well as terms and conditions, and a period of strong profitability is anticipated in the current upturn."
