Lloyd's of London profits dented by largest insurance aircraft claims since 9/11

Published: 26 March 2015

Updated: 12:29, 26 March 2015

The worst year for airline disasters since the 9/11 attacks in 2001 today hit profits at the 327-year-old Lloyd’s insurance market.

Claims from the two Malaysia Airline crashes, fighting at Tripoli airport and other tragedies including the loss of an Air Asia plane off the coast of Indonesia in December left Lloyd’s with £310 million of aviation claims — the most it has faced in 14 years. 

These disasters came in an otherwise benign year for catastrophe losses at Lloyd’s, whose underwriting syndicates protect against risks including earthquakes and hurricanes.

It said it was too early to estimate the cost of potential claims from the Germanwings diasaster, which saw an aircraft crash into the French Alps, although German insurance giant Allianz has already confirmed it is the lead insurer.

Lloyd’s can trace its roots back to 1688, when it was founded in Edward Lloyd’s Coffee House in the City of London. It is now the world’s largest insurance market with gross written premiums of £25.3 billion.

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Pre-tax profits dipped from £3.2 billion in 2013 to £3.16 billion last year in what its boss Inga Beale described as “challenging market conditions”.

As well as claims from aviation disasters, insurers’ profits have been hit by low interest rates and new investors such as hedge funds, looking for better returns than from conventional investments.

The abundance of capital in the Lloyd’s market has held down the price insurers can charge, creating a “soft” market.

“The robust performance of the market in 2014 reflects a collective achievement, of which we should be proud,” Beale added.

Lloyd’s first female chief executive said she welcomed the latest wave of takeover activity in the market because it was attracting overseas capital. Recent deals include Fairfax Financial of Canada’s £1.2 billion deal for Brit Insurance. 

She also highlighted the growing threat of cyber-attacks and called for new investors into Lloyd’s to support this “new risk exposure” rather than the data-drive property and casualty market. 

Mark Grice, head of insurance at accountancy Mazars, said: “This is a good result given the low interest rate and premium rate environment. Also for Lloyd’s it has been a year of development as it sets operations in emerging markets such as Beijing.

“The Lloyd’s platform remains attractive as can be seen by M&A activity and its intention to modernise.”