Thursday, May 20, 2010

Lloyd's of London warns of 'perfect storm' threat to insurance market

Julia Kollewe in the Guardian (UK): The head of the Lloyd's of London insurance market warns today that one more major disaster could plunge the insurance industry into the red this year. Richard Ward will tell a gathering of insurance chiefs that the industry is facing the toughest year he can remember, the Guardian has learned.

"It isn't overstating the situation to say that the insurance industry is facing a potential perfect storm this year," Ward says in his keynote speech at the Insurance Day London Summit. Speaking as the industry braces itself for the US hurricane season, Ward says: "That is a significant challenge for the industry worldwide but it is a storm we can see coming and we can prepare for. Insurers who keep their discipline and don't chase risky short-term profit will stand the best chance of long-term survival."

The insurance industry is forecasting a loss of up to $3.5bn (£2.4bn) from the growing oil spill in the Gulf of Mexico. This will be the biggest loss in the energy market since the explosion of the Piper Alpha rig in the North Sea in 1988, which led to a spiral of reinsurance losses and cost Lloyd's £8bn between 1988 and 1992.

Swiss Re has put total insured losses from the oil spill at $1.5bn-$3.5bn, and its own loss at $200m. Lloyd's will issue its own estimate later this month…..

Fire boat response crews battle the blazing remnants of the off shore oil rig Deepwater Horizon April 21, 2010, shot by the US Coast Guard

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