In a year of catastrophes Lloyd’s has still managed to turn in a pre-tax profit of £2.19 billion ($3.4 billion) for 2010, although it was £1.6 billion ($2.4 billion) – or 43% – less than the previous year.

The drop in profit was directly related to the number of catastrophes, in particular the Chilean earthquake in February.

If this one event wasn’t bad enough, Lloyd’s also faced claims from the Christchurch earthquake, floods in Australia and the loss of the Deepwater Horizon oil rig in the Gulf of Mexico.

So while the claims increased, fortunately for Lloyd’s gross written premium continued to flow in – up £619 million ($961 million) last year to £22.59 billion ($35 billion).

This was countered with £11.5 billion ($17.8 billion) of paid claims for the 2010 calendar year.

Lloyd’s CEO Richard Ward says despite the higher number of catastrophes, the result is “solid”.

“These are challenging times for insurers,” he said. “Rates have been softening, there is excess capital across the industry and investment returns are down.”

The excess capital in the industry is reflected by Lloyd’s reserves at the end of 2010, which stood at £19.1 billion ($29.6 billion). This is made up from capital, reserves, subordinated debt and securities.

The figure has remained static since a dramatic jump from the 2008 reserves of £15.2 billion ($23.5 billion).

While most sectors returned healthy profits, motor insurance was the only class to deliver a negative result for the year – down £520 million ($807 million).

UK business generated premiums of £1.1 billion ($1.7 billion), but losses occurred due to insurers facing “a considerably more hostile claims market”.

Lloyd’s says in its annual report that too many insurers underestimated the issues facing the motor sector “and reacted too slowly”.

The increased claims were mainly driven by increased frequency of accidents and the severity of third-party damage.

As a result of claims taking almost half of revenue, the combined ratio has blown out to 151.3%. And this was despite rate increases.

On a positive note, reinsurance delivered a £590 million ($915.7 million) profit. Premiums for 2010 were £8.3 billion ($12.8 billion) delivering a combined ratio of 90.3%.

Lloyd’s says the good result was partly due to no hurricanes making US landfall during the year, and the earthquakes and floods around the world were within its planned annual catastrophe loss ratios.

One negative was the loss of the Deepwater Horizon oil rig, which impacted on the offshore energy reinsurance market.

Lloyd’s is predicting a rosy outlook for the reinsurance sector in 2011 with high levels of capital and rate reductions.

This was all before the “perfect storm” in the first quarter of this year that has delivered floods, cyclones, earthquakes in the southern hemisphere and an earthquake and tsunami in Japan.

Lloyd’s also notes rising oil and other commodity prices could drive up claim costs for business interruption insurance.

The Lloyd’s syndicates that have Australian offices reported mixed gross written premium results for 2010.

Arch Underwriting saw premiums rise from £33 million ($51 million) in 2009 to £113 million ($175 million) last year.

QBE’s premiums grew slightly from £1.45 billion ($2.2 billion) in 2009 to £1.47 billion ($2.2 billion) last year.

Melbourne-based Sportscover Underwriting saw dramatic premium growth to £52 million ($80 million) last year compared to £22 million ($34 million) in 2009.

Beazley Furlong reported increased premiums in 2010 of £1.34 billion ($2 billion) compared to £1.31 billion ($2 billion) in 2009 and Catlin Underwriting Agencies wrote premiums of £1.68 billion ($2.6 billion) in 2010 compared to $1.6 billion ($2.4 billion) in the previous year.

Newline Underwriting Management suffered a decline in premiums from £117 million ($181 million) in 2009 to £105 million ($162 million) in 2010.

Mr Ward says it will be Lloyd’s role to help the market steer through the cycle and to make sure insurers write for profit and not growth.

“At the same time we are positioning the market to take advantage of future opportunities by expanding in new economies and making it even easier to do business with Lloyd’s,” he said.

“Another challenge in 2011 is Solvency II and I am confident we are making good progress.”

Aside from natural disasters, Solvency II is shaping up to cause insurers more grief this year due to the complexity and cost of its implementation.

“We must make sure this one piece of regulation doesn’t do lasting damage to our international competitiveness – either for Lloyd’s or the industry more widely,” Mr Ward said.