Lloyds shrugs off £697m loss in wake of disasters

Lloyds of London plunged to a dramatic loss in the first half of this year, buffeted by claims from disasters in Australia, New Zealand, Japan and America.

Insurers in the 323 year-old market paid out £6.7 billion of claims in the six months to June, leading to a loss of £697 million.

That it was able to pay the claims is a sign of its financial strength, it argues.

Chairman Peter Levene said: "Lloyd's ability to pay billions in claims to help these communities rebuild is unquestioned and the fact that we have managed to do so without any call on our central capital reserves is testament to the market's exposure management."

Premiums in the affected areas are bound to go up, but Lloyds insists not all insurance is getting more expensive.

It says the number of natural catastrophes this year is "unprecedented".

Chief executive Richard Ward acknowledged: "These are tough times for the insurance industry."

Lloyds is made up of 88 syndicates, writing business in 200 countries.

Low interest rates are a serious problem for insurers because they make it difficult to produce an investment return on premiums without investing in risky assets.

Ward says Lloyds will remain cautious.

A third of its money is held in cash, with most of the rest going into government debt, primarily US and UK treasuries.

Said Ward: "In the absence of a better suggestion than US Treasuries, that is where our money is going to stay. The dollar is the worlds reserve currency. It has not been replaced by another. It is not going to be replaced by the Euro."

Lloyds is expecting to pay out £1.2 billion for the Japanese earthquake and tsunami, the fourth largest event to hit the market.

The biggest was Hurricane Katrina in the U.S. in 2005, which produced £2.4 billion in claims.

In the first half of last year, Lloyds managed a profit of £628 million despite dealing with claims from the Deepwater Horizon oil rig disaster in the Gulf of Mexico and an earthquake in Chile.