[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Wednesday, 14 September 2005, 15:07 GMT 16:07 UK
Lloyd's faces 1.4bn Katrina bill
Damaged boats in a harbour in Louisiana
The full extent of the damage isn't known yet, Lloyd's says.
Hurricane Katrina could cost Lloyd's of London 1.4bn ($2.5bn), the insurance market said on Wednesday.

The sum is a provisional estimate of the likely insured losses from the disaster, although the exact figure is not likely to be known for some time.

Lloyd's said a loss on that scale was containable and would not force individual syndicates out of business.

Ratings agency Standard's & Poor's has warned that certain Lloyd's syndicates could face severe losses.

S&P has put Lloyd's on its "CreditWatch Negative" list - which could result in a downgrade of its A credit rating - although it said that it did not believe Lloyd's overall solvency would be jeopardised.

Provisional estimate

Experts believe Hurricane Katrina could turn out to be the costliest natural disaster in history with insured losses ranging from between $25bn and $50bn.

Most of the claims are likely to result from damage to oil facilities in the Gulf of Mexico and to commercial and residential property in New Orleans and throughout the affected states.

Lloyd's said the financial impact of Katrina may be similar to that caused by four big storms in the US last year.

The financial position of the Lloyd's market is strong
Lloyd's of London

Lloyd's arrived at the 1.4bn figure after consulting with agents who manage each of its 62 individual syndicates.

However, it stressed that the full extent of the damage was currently unknown and losses were still occurring.

Contingency planning

Lloyd's has financial safeguards in place, including a Central Fund, to enable claims to be paid in the event of massive catastrophe.

Each syndicate assumes a certain level of losses from a disaster such as Katrina into its business planning.

Lloyd's said the estimated financial cost of Katrina was in line with its own contingency planning for a major storm hitting the Gulf of Mexico.

"The financial position of the Lloyd's market is strong," it said in a statement.

"Based on current information, Lloyd's believes any impact on the Central Fund would be immaterial and there is nothing to suggest that any syndicate would not be able to trade forwards as a direct result of Hurricane Katrina."

Lloyd's single largest payout followed the 11 September attacks in the US in 2001, which led to claims of $3.5bn.

New debt fear for Katrina victims
14 Sep 05 |  Business
Katrina damage 'could top $25bn'
14 Sep 05 |  Business
Big rise in Katrina cost forecast
13 Sep 05 |  Business
Katrina cost set to hit reinsurer
02 Sep 05 |  Business

The BBC is not responsible for the content of external internet sites


Americas Africa Europe Middle East South Asia Asia Pacific