Hiscox signals insurance slowdown

ONE of the biggest insurers at Lloyd's of London is slashing its underwriting capacity next year in a sign the market is preparing for a fall in premiums.

Hiscox today said it was cutting back capacity at its main Syndicate 33 by 14% in the first public statement by a Lloyd's underwriter on its projections for 2005.

Chief executive Bronek Masojada called on rivals to follow suit and said the market needed to maintain discipline as the cycle begins to soften. 'If you are disciplined, you should shrink,' he said.

Speculation has been mounting that Lloyd's may have to cut capacity by 20% to £11.5bn next year to limit the amount of business insurers can write and to reduce their exposure to losses.

Lloyd's is desperate to avoid the mistakes of the late 1990s when companies continued to write new business in a chase for greater market share. They were then hit by a raft of claims.

Hiscox said rates were still at a profitable level on all its lines, but added there were some reductions in property policies and on directors' cover in the US.

It added that it was too early to determine the size of its exposure to Hurricane Charley, which could land firms with the second-biggest storm bill.

Masojada said any loss should fall within the group's budgeted loss ratio. Hiscox's shares fell 1 1/2p to 168p.