Lloyd’s has posted a £697 million ($1.54 billion) loss for the first six months of this year following a string of natural catastrophes, including the Australian and US floods and earthquakes in Christchurch and Japan.

The loss is the market’s “costliest six months on record”, and stands in stark contrast to the £628 million ($1.54 billion) profit it posted for first half last year.

However, the result was far better than commentators expected. London analysts Mazar had tipped a loss of double that amount.

Lloyd’s CEO Richard Ward says: “These are tough times for the insurance industry but we are well positioned to handle them.

“Despite incurring $US10.8 billion ($10.76 billion) in claims from the costliest first-half on record, Lloyd’s entered the second half of the year with $US92 billion ($91.7 billion) in net assets to support our business and pay claims,” he said.

He also warned that Lloyd’s can’t rely on investment income to subsidise underwriting, and therefore “must decline underpriced risks”.

The result produced a combined ratio of 113.3%, compared with 98.7% in the corresponding period last year. This was slightly better than Lloyd’s peers. The Bermuda reinsurance market recorded a 117% combined ratio and the US sector is tracking at 116%.

Outgoing Lloyd’s Chairman Lord Levene says the claims seen so far this year “have already exceeded the total for 2009/10 and we have not yet reached the end of the Atlantic hurricane season”.

Despite this half-year’s heavy loss, Lord Levene says Lloyd’s is in a better position than when he joined it nine years ago.

“If we had experienced this level of natural catastrophe back then, commentators would have openly questioned our ability to trade forward,” he said.