Hurricane Katrina has pushed Lloyd’s into the red, with the market announcing it’s heading for a loss in 2005. Revised estimates of the market’s exposure from hurricanes Katrina, Rita and Wilma now sit at $US5 billion ($6.76 billion) – nearly double the original estimate.

Returns from each of the market’s managing agents indicate the total payout for Katrina alone will be in the region of $US3.42 billion ($4.62 billion).

At its half year results announcement in early October, Lloyd’s said it was still possible for the market to record a profit in 2005 provided there were no further major catastrophic losses or other unforeseen events.

It was bad news and good news for the market. While a loss was unwelcome, it will enable underwriters to raise their premiums in the catastrophe classes. Reports suggest several underwriters in the market have already raised millions of pounds in extra capital to take advantage of rising rates.

The market now expects to have the capacity to write about £14.7 billion ($34.1 billion) next year – an increase of 7% on this year. This contrasts with the position before the hurricanes, when softening rates were expected to lower next year’s premiums by 7%.

Director of Finance and Risk Management Luke Savage says the market remains financially robust. “All businesses in the market expect to be able to meet their liabilities from the hurricanes.

“The events of the past few months have shown that the determined focus at Lloyd’s on underwriting discipline has not come at the expense of the market’s ability to react speedily and flexibly to the opportunities brought about by changing conditions.

“Before the hurricanes struck it was expected that Lloyd’s capacity would reduce in 2006. The planned increase reflects the change in market conditions and is an appropriate response from the market.”