The London insurance market remains robust despite the high volume of large claims, a report from KPMG has found.

Its General Insurance Performance Benchmarking Survey analyses the 2011 first-half results for nine London market insurers – Amlin, Aspen, Beazley, Brit, Catlin, Hardy, Hiscox, Novae and Omega.

Mark Winlow, KPMG’s UK Head of General Insurance, says eight of the nine insurers analysed posted financial losses for the year to date, with the results dominated by “catastrophe claims, soft rating conditions and deflated investment returns”.

“Despite these challenges, the news for the London insurance market is not as bad as it might initially appear,” Mr Winlow said.

“This sector of the market is resilient, and insurers are confident in their ability to meet their claims. It will undoubtedly be a hard year, but the insurers have recovered from challenging periods in the past, and this time around they appear to have enough capital to absorb losses.”

KPMG predicts that the second half will see consolidation in the sector, premium increases and a renewed focus on cost management measures such as outsourcing.

Mr Winlow says the potential for consolidation has been fuelled “partly by the desire for growth, and partly by Solvency II, which is demanding a greater level of requirement around capital”.

He says premium increases “will not be across the board” and “insurers will have to be circumspect and realistic” about rate increases.

“The challenge for the London market will be how much their customers can stand, understanding the level of premium increases compared to customer demands.”