Half the syndicates at Lloyd's of London will make a loss in the 1998 and 1999 years of account, predicts rating agency Moody's.
It expects to see market bottom line pure year losses rising from -0.8% of capacity in 1997 to -6.2% in 1999.
Releases from previous years are not expected to be sufficient to prevent overall Lloyd's losses for either years. Moody's forecasts that losses will total £398 million in 1998, which is -3.9% of capacity.
There is a marginal improvement in 1999 to losses of £376m (-3.8%). But, greater losses could accrue in 1999 if claims rise beyond the "normal" level assumed.
The rating agency has calculated that a hurricane resulting in a loss in excess of £30 billion would cause a further £1145m of losses (-11.6% of capacity).
Moody's also warns that the picture could remain as bleak in 2000 because of the threat posed by the Millennium Bug and the prevalence of "long term agreements" which will restrict the market's ability to hike premiums.
"Our negative market forecasts for the 1998 and 1999 years of account reflect the ever worsening loss ratios being reported by Lloyd's syndicates," said Mark Hewlett, managing director of Moody's European Property & Casualty and Reinsurance Division.
"We currently expect 53% and 51% of 1998 and 1999 trading syndicates respectively to make a loss.
"Year 2000 prospects are dampened by the potential impact of Y2K related losses and the prevalence of "long term agreements". A real improvement in market conditions may not occur until 2001/2002."
n New corporate capital backed Lloyd's syndicates are faring worse than the market average prompting Moody's to speculate that the capital providers may be looking to back out. Of the new 16 corporate units 69% are forecasting losses in 1998 compared to Moody's market figure of 52%.
Of these loss-making corporate syndicates 82% are currently forecasting losses in excess of five per cent of capacity compared to the market figure of 72%.