Lloyd’s profits hurt by disaster claims
TEXT OF INTERVIEW
STEVE CHIOTAKIS: 2010 is turning out to be a bruising year for Lloyd’s of London. The British insurer paid out more in claims in the first half of the year than in any other six-month period in its history. Marketplace’s Stephen Beard is with us live from London with the latest. Hi Stephen.
STEPHEN BEARD: Hello Steve.
CHIOTAKIS: Why has it been so bad for Lloyd’s?
BEARD: They’ve picked up the tab for an unusually long list of natural disasters. The biggest was the earthquake in Chile at the beginning of this year. That cost Lloyd’s $1.4 billion, the second most expensive earthquake ever. And there have been many extreme weather events in Europe and the U.S. piled on top of that.
CHIOTAKIS: And what about the BP Gulf oil spill?
BEARD: Well Lloyd’s is getting off rather lightly from that disaster because BP, like a lot of big oil companies, largely insures itself. So Lloyd’s may end up having to pay just the cost of the rig, which was owned by another company. But there’s a point worth making, Steve, about disasters and big insurance claims. They hit the insurers’ profits now — and they have done in Lloyds’ case, they’ve been halved in the first six months of this year — but in the longer term, they’re good for business. They underline the need for insurance, as Richard Banks of Insurance Day Magazine points out.
RICHARD BANKS: There will be an increasing awareness of the customers of Lloyd’s and other insurance companies around the world of the risks these businesses are facing, and so they will be more inclined to buy insurance.
And more to the point, they’ll be more inclined to pay higher premiums. And that’s been a complaint of many insurers that premiums aren’t high enough.
CHIOTAKIS: Marketplace’s Stephen Beard in London. Stephen, thank you.
BEARD: OK Steve.
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