Pay-back pledge from insurers

Lancashire's special dividend of 86p per share marks the first direct return of capital this year from the London-listed non-life insurance sector, which has allowed surplus cash to build up rather than write business at inadequate profit margins.

Rival Novae has also committed to handing back spare cash to shareholders, with an announcement expected before the end of the year, and analysts reckon shareholders could also get a payout from Amlin.

Insurance and reinsurance prices have been falling across most business lines for two years, reflecting intense competition between well-capitalised insurers and a comparative dearth of major catastrophe-induced losses.Yesterday, Hiscox said it expected prices to come under additional pressure in the run-up to key annual policy renewals in January, blaming an absence of major storms during the June-to-November hurricane season in the US.

Prices typically jump after big hurricanes as a welter of claims eats into insurers' capital, forcing less well-funded players to retrench and freeing those still in the market to charge more.