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By DAN REYNOLDS, senior editor of Risk & Insurance®

Wow, can you imagine the profits some insurers would be seeing if the global equity markets weren't staggering around as they are.

The London market this week reported gross written premium of $21.46 billion in the first six months of the year, an increase of 35 percent over the $15.91 billion in the first six months in the year-ago period.

"The 35 percent increase in gross written premium reflects a number of factors, including changes in exchange rates, the flight to quality and new business brought to Lloyd's from new syndicates," said Louise Shield, a Lloyd's spokeswoman, in an e-mailed statement this week.

The dollar exchange rate Lloyd's used to calculate its first-half 2009 gross written premium was $1.50, compared with the $1.98 the British pound was fetching against U.S. currency in the first half of 2008.

Despite an increase in claims frequency that syndicate members say is being driven by "casualty and other classes most exposed to the recession," Lloyd's reported an underwriting profit of $1.08 billion in the first six months of 2009 compared with $1.11 billion in the first six months of 2008.

In their written statements on Lloyd's results, Lloyd's directors used the phrase "flight to quality" to describe their upbeat financial results.

"Due to the economic crisis, we are seeing an increasing number of policyholders wanting to spread their risk--which has benefited a subscription market such as Lloyd's," explained Shield.

"Lloyd's also has a strong rating and capital position, which is important for both brokers and policyholders wanting to place business," she said.

Lloyd's CEO Richard Ward commented to a Risk & Insurance® correspondent in Monte Carlo in September that Lloyd's intends to maintain a strong focus on North America, despite other stated intentions to derive a greater proportion of its revenue from outside that continent.

"We are seeking new opportunities to increase the overall amount of business that we write, but the United States will continue to be our most important market--and Canada our third biggest-- which is why I spend a major part of each year in America," Ward said in September.

Lloyd's directors cautioned this month, however, that neither the economy nor their latest six-month results are in the free and clear just yet.

Poor economic conditions and "recession-driven loss activity" are "almost certain to accelerate," was how a report from Lloyd's Chairman Peter Levene and Ward phrased it. "Added to this, the North Atlantic hurricane season is now active and continues to pose a significant threat--as does the Swine Flu Pandemic."

EUROPE NOT SO GOOD

Across the English Channel and to points north, south and east, the story wasn't as shiny. A.M. Best reported this week that nonlife gross written premiums as a percentage of gross domestic product were either flat or down in 2008 for insurers based throughout the major European countries.

According to data provided to Best by the Comite European des Assurances, insurers in both the United Kingdom and Germany, two of the pre-eminent economies in Europe, have seen gross written premiums decline in each of the last two years. In Spain and Belgian, gross written premiums have stayed flat from 2006 through 2008.

Heavy investment losses have shaved results in Central and Eastern Europe, and a particularly hard-hit construction and commercial property sector were was where a lot of the premium bleeding occurred in Western Europe.

In Germany, A.M. Best reported that, although underwriting results have strengthened due to a lack of major natural disasters, the appetite for insurance products, due to the moribund economy, has remained flat.

--Reporting from London correspondent Graham Buck was included in this report.

October 6, 2009

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