Lloyd’s of London Reports $831.8 Million in Red Ink

Lloyd’s of London, the world’s biggest insurance company, said Wednesday that the Piper Alpha oil rig disaster and claims for pollution and asbestos-related disease pushed it into the red for the first time in 21 years in 1988.

Lloyd’s reported a record $831.8-million loss for its 400 syndicates and warned of more to come.

“The market’s results for 1988 show our first overall loss for 21 years, and further losses are expected for the 1989 and 1990 accounts,” Chairman David Coleridge said.

He said the losses were also caused by depressed insurance premiums, and warned of a rocky future unless Lloyd’s is able to better match risks to premiums.

“If . . . we fail to return a profit to our capital base, . . . we shall simply and collectively cease to exist,” he said.

However, he said at the company’s annual meeting that although Lloyd’s faces a “critical” time, a clampdown on costs and a more prudent policy of reserving against unknown future liabilities should return profitability.

“I hope I am not going to be the last chairman of Lloyd’s,” he said. “And I hope I’m not going to be the chairman of Lloyd’s that leaves this room and turns out the lights.”

The insurance market’s profit and loss figures are posted three years in arrears to allow time for claims to be figured in. Lloyd’s was expected to post a large loss for 1988, after an $831-million profit in 1987.

Coleridge said that since 1987 “the world’s insurance industry has experienced a three-year period of catastrophes and resulting claims which have defied the law of averages.”

Lloyd’s has been rocked by the news that some of the 26,500 members who underwrite risks faced record payouts for losses in 1988 and after. Some observers have predicted the end of the 300-year-old institution.

To join, members must have at least $408,000, excluding the value of their homes. They can underwrite premiums of up to $3.3 million with unlimited liability.

Their personal wealth must go toward losses if necessary. Some have already received bills of more than $163,000 each from syndicates with losses in 1988. Others face bankruptcy.