Lloyd’s head sees insurance rates rising

 Insurance rates are likely to increase in 2009 and the Lloyd's of London market is doing well, despite the economic downturn, its chairman said on Friday.
Peter Levene said the recent precipitous fall in sterling had prompted Lloyd's to tell insurers to increase their capital reserves, which they were now doing.
"As far as we are concerned we don't see anything dramatic, so we are a sort of rock of stability in the storm," he told Reuters on the sidelines of the annual meeting of the World Economic Forum.
Lloyd's made record profits in 2006 and 2007 but pre-tax profit fell by nearly half in the first half of last year, due to lower investment income, weaker insurance rates and higher claims.
Levene said poor investment returns would continue to weigh on the full-year figures but Lloyd's would deliver a solid profit.
"It will be a nice black number, so if people look it and say did Lloyd's make a good profit, we'll say 'Yes'," he said.
For the current year, a reduction in capacity due to scarce capital would put upward pressure on rates. "The mood music is that '09 will be better … they should go up," he said.
While the recession now gripping major economies will have some knock-on impact on the insurance market, the loss of business would be limited.
"If you take a major car manufacturer, they may cut their output by half but unless they sell off the factories they are still going to insure," he said.
Some Lloyd's of London insurers have recently started tapping private investors — or "Names" — to provide underwriting capital.
But Levene said there would not be any widespread return to reliance on such individuals, who traditionally backed the 325-year-old market.
More than 85 percent of Lloyd's capital is now corporate and that proportion would not change significantly, he said.