Hiscox, the Lloyd’s of London insurer, today revealed it had weathered a potential £50 million bill from this summer’s floods in the UK to post record half-year profits.

The underwriter, best known for writing fine art, catastrophe and kidnap and ransom insurance, added that it Hurricane Dean should not cause any major loss despite battering Jamaica.

Experts believe it will pass to the south of major oil and gas platforms in the Gulf of Mexico and hit the country’s Caribbean coastline.

Robert Hiscox, chairman, said: “I’m sorry for the holidaymakers of Mexico but they aren't high on my agenda.

"Yet I remain in trepidation for what the rest of the year might bring. There were forecasts of an above average year for hurricanes and we are in the peak of the season.”

Pre-tax profits at the group surged to £105.6 million in the six months to June 30, a 72.1 per cent increase, fuelled by strong business in its internationally-traded book at Lloyd’s of London. Gross premiums rose 17.3 per cent to £733 million.

The June floods in Yorkshire left Hiscox with a £30 million bill, mainly from the group having reinsured the policies of more mainstream rivals. It believes the bill from July’s floods in the west of England will be £20 million.

Windstorm Kyrill, which tore across the UK and mainland Europe in January, caused a £25 million loss.

Hiscox is expanding into household insurance and said that premiums in the market were “now generally being increased” following the flooding, which industry experts believe could cost the insurance sector as a whole £3 billion.

Mr Hiscox said he hoped the flooding would remind “foolish” rivals cutting rates in a bid to win business of the need to act prudently and build reserves over time to cover potential catastrophes.

The group today revealed it was cutting underwriting capacity at its main Lloyd’s syndicate by 20 per cent next year “to ensure underwriting discipline”.

Mr Hiscox said: “There are people out there quoting very low prices who will be found out.

“Experts said the wind storms of 1987 and 1990 were one-in-300-year events. In that case I’m about 2005 years old.

“We were told the floods in July were one-in-150-year events, but then The Times showed a picture of Tewkesbury under water 60 years ago,” he said.

Shares in the group rose 3 per cent, or 8p to 271.25p. Shareholders will receive an interim dividend of 4p per share, up 33 per cent on a year ago.

Jonathan Firkins, analyst at UBS, said the pre-tax profits reported by the group were 22 per cent ahead of his expectations and reiterated his 'Buy' rating.

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