A THIRD of the 62 syndicates in Lloyd’s of London are revising their 2006 business plans to take advantage of rocketing insurance premiums, the market said as it admitted that Hurricane Katrina would drive down full-year profits.

Announcing the 317-year-old market’s results for the six months to June 30, Nick Prettejohn, the chief executive, said that pre-tax profit was up 21 per cent to £1.38 billion against the same period last year. However, that strong result would be overshadowed by losses from the hurricane season, he said.

“We still expect the market to make a profit (in the full year) but the exact dimensions are hard to quantify, particularly because Katrina is an unusual loss and there’s still a way to go in the hurricane season.”

Losses from Katrina are expected to be about £1.4 billion for Lloyd’s. Those losses have caused the cost of insurance in the market to go up, meaning that at least 20 of the syndicates are adjusting their business plans to underwrite more business next year. A further 20 had already planned for more business next year.

Mr Prettejohn said that he now expected a single-digit percentage increase in capacity for next year, compared with this year’s £3.7 billion.

Since Katrina, the most expensive natural disaster for more than ten years, premiums have increased by up to 400 per cent for high-risk business, such as offshore oil rigs in the Gulf of Mexico.

Lloyd’s announced a combined ratio of 87.3 per cent, up from 85 per cent last year but still lower than for other US and European insurers and reinsurers. The combined ratio shows the ratio of claims to premiums and expenses. A ratio of less than 100 per cent means that the insurer has made an underwriting profit.

The amount of premiums written by insurers in Lloyd’s fell from £9.8 billion to £8.4 billion, indicating that its underwriters were showing discipline in taking on profitable business only rather than trying to rapidly gain market share.

Mr Prettejohn is keeping a close eye on developments in the US, where Jim Hood, the Mississippi attorney-general, is suing insurance companies to force them to pay for flood damage to homes in the wake of Katrina. “It’s always concerning when a government tries to interfere in contract matters,” Mr Prettejohn said.

It was too soon to know whether Lloyd’s insurers would become embroiled in any such lawsuits, he said.

Richard Gradidge, an insurance analyst at Numis Securities, said that the Lloyd’s results were “no big surprise, given by the time of the interims we’d already heard much of the noise in the market from the listed companies”.

He said that the Lloyd’s bill for Katrina could still rise. “Given the movement in the industry on losses, it wouldn’t be a complete surprise to see the Lloyd’s figure going up.”

Wellington Underwriting, the Lloyd’s insurer, said that it expected its losses from Katrina to be about $125 million (£70 million) before tax, compared with its previous estimate of $75 million.

Mr Gradidge said the first-half figures indicated that the market had been disciplined.

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