Lloyd's of London says it can handle $2.5 billion Sandy loss

Wed Dec 19, 2012 6:34am EST
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By Myles Neligan

LONDON (Reuters) - The Lloyd's of London LOL.UL insurance market said it can cope comfortably with claims from Superstorm Sandy that could cost it up to $2.5 billion, 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 Wednesday.

Sandy, which killed 132 people as it swept through the northeastern United States on October 29, is expected to cost the insurance industry up to $25 billion, making it the second-costliest storm after hurricane Katrina in 2005.

At the top of the Lloyd's estimated range of $2 billion to $2.5 billion 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 $4.3 billion and $3 billion 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.   Continued...

A doorman awaits limousines at the headquarters of Lloyd's of London, in the City of London May 13, 2011. REUTERS/Chris Helgren