Lloyd's insurers will have to be able to withstand a hurricane inflicting up to $100 billion (€82 billion) of claims on the global insurance industry, it was revealed yesterday, as it prepares to report its first financial loss since 2001.

Lloyd's has made several of the scenarios used to test the insurance market much tougher in response to last year's ferocious hurricane season - estimated to have cost the entire global insurance industry up to $80 billion - and expectations of further damaging windstorm seasons.

The action comes as Lloyd's is expected on Thursday to report a financial loss for 2005 after £2.9 billion (€4.1 billion) of hurricane claims. Lloyd's declined to comment on the result, but the loss is expected to be modest.

Under newly published guidelines, Lloyd's 62 syndicates must ensure they can withstand claims arising from hurricanes hitting the US Gulf of Mexico and Florida, each costing the global insurance industry $100 billion.

Previously, they had to plan for a Gulf of Mexico hurricane wreaking $60 billion of damage and a Florida windstorm generating $70 billion of total insured losses. Lloyd's insurers must also be able to withstand two significant loss events in quick succession.

Under the new guidelines, they must plan for a northeast US windstorm causing $65 billion of gross property losses and a $30 billion windstorm in South Carolina. Previously, they had to demonstrate they could manage claims from two successive events, each costing the entire global insurance industry $20 billion.

So-called "realistic disaster scenarios" test Lloyd's ability to withstand significant claims. Businesses that write insurance in Lloyd's must estimate, by way of modelling, the losses they would incur from roughly 20 hypothetical scenarios, and then demonstrate that they could manage these claims.- (Financial Times service)