Lloyd's will suffer major Katrina-related losses that nonetheless will not threaten the solvency of its Central Fund, according to a new report from Moody's.

The report noted that Lloyd's has estimated the impact of the hurricane on all of its syndicates at $2.5 billion--equivalent to 10 percent of its 2005 capacity.

A 10 percent loss on capacity would be equivalent to 20 percent of capital, which Moody's termed "a relatively high figure compared to other entities, although containable within earnings for most syndicates at this stage of the underwriting cycle."

Taking into account the current strength of the underwriting conditions, Moody's said the loss should not be a material issue, if an issue at all, for Lloyd's Central Fund.

"Most syndicates are expected to remain profitable, or only have limited losses, despite the hurricane's impact, assuming a normal level of loss activity for the remainder of 2005," the report said.

Moody's said ultimate losses still remain uncertain due to a number of factors, including whether the losses will be determined to stem from flood or wind. "But given that Hurricane Katrina is not an unexpected event for this area, in contrast to the terrorist losses at the WTC, and with the loss being expected to be treated as a single loss, there should be more comfort over the range of likely loss from this event," the report said.

In addition, the fact that terms and conditions have not weakened at this stage of the softening market will help Lloyd's still see a profit for this year, according to Moody's.

No rating actions are foreseen with regard to any of the syndicates of Lloyd's as a result of the storm.

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