The Lloyd’s of London insurance market said it can cope comfortably with claims from Superstorm Sandy that could cost it up to $2.5bn, the third-biggest loss in its 324-year history.
There will be no impact on the market’s central fund, a cash reserve used to meet claims if any of the insurance syndicates operating at Lloyd’s finds itself unable to pay.
“The Lloyd’s insurance market remains financially strong and, while claims from this storm could still evolve over time, the market’s total exposure is well within worst-case scenarios,” chief executive Richard Ward said on yesterday.
Sandy, which killed 132 people as it swept through the north-eastern United States on October 29, is expected to cost the insurance industry up to $25bn, making it the second-costliest storm after hurricane Katrina in 2005.
At the top of the Lloyd’s estimated range of $2bn to $2.5bn in claims, Sandy would displace last year’s Thai floods as the market’s third-biggest loss, surpassed only by Katrina and the September 11 terrorist attacks.
Those disasters cost Lloyd’s $4.3bn and $3bn respectively, without adjusting for inflation.
Sandy came towards the end of a relatively uneventful year for natural catastrophes, in contrast with 2011, which was the industry’s second-costliest year on record after Japan’s Tohoku earthquake and Thailand’s worst floods in half a century.
Analysts say that insurers’ claims bill for 2012 as a whole will be relatively subdued and most should turn a profit for the year.
“My overriding view is that all Sandy will do is turn what would have been an exceptionally profitable year back into an average to slightly below average year,” Espirito Santo analyst Joy Ferneyhough said.
Insurers look set to absorb about $65bn in catastrophe claims this year, slightly more than half the $120bn they picked up in 2011, reinsurer Swiss Re said yesterday. Lloyd’s, a group of about 80 competing insurance syndicates that traces its origins back to a 17th century London coffee house where merchants insured ships, has historically borne 10 per cent of the claims from big natural disasters.
Insurers and analysts have said that accurately assessing the final bill from Sandy is difficult because of the size of the affected region, which includes New York and other densely populated and industrialised areas.