When the size of potential losses on sub-prime mortgage securities started to become clear last year, many observers were confident as to who the biggest losers were likely to be. Stupid insurance companies, and not clever investment banks.

As it turns out, the clever investment banks have been clobbered while insurance companies have got off relatively lightly. With the exception of the monoline bond insurers, few other companies have been hit with big claims.

And contrary to the predictions that billions of dollars of toxic investments had found their way into their investment portfolios, insurers have had relatively modest writedowns. Lloyd’s of London, the biggest insurance market, has not been immune. But the 100 or so insurance claims that have gone into the market over the past eight months have been pretty small beer.

They involve claims relating to anything from company executives named in class-action lawsuits to banks that have had to pay out to clients because of an unintentional professional error or contractual negligence.

Richard Ward, Lloyd’s chief executive, yesterday gave the credit crunch a reading of seven or eight on the financial earthquake Richter scale. But he was still able to report record profits of almost £3.9 billion for last year and admit to total sub-prime claims exposure so far of less than £100 million.

Mr Ward has rightly won plaudits for tightening up the underwriting process at Lloyd’s and concentrating minds on profits, rather than volumes.

Lloyd’s appears pretty well shielded. And although sub-prime related claims are likely to increase, as ever with insurers, the cost will be passed on. Premiums for directors’ and officers’ liability cover are already rising ahead of the expected flood of lawsuits.

david.wighton@thetimes.co.uk

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