The Lloyd’s market made a £2bn ($2.8bn) pre-tax loss in 2017 as £4.5bn of major claims took their toll.

The market made its first underwriting loss in six years, as the Lloyd’s combined ratio worsened by 16.1 percentage points to 114.0 percent. Lloyd’s plunged into the red after making a £2.1bn pre-tax profit a year earlier.

Lloyd’s had an underwriting loss of £3.4bn in 2017, compared to a £468mn underwriting profit the year before.

Gross written premiums increased by 12.3 percent to £33.6bn, driven by new products such as cyber cover and expansion in the US market.

The £4.5bn major claims tally more than doubled from 2016, as hurricanes Harvey, Irma and Maria battered the 332 year old market.

Gross of reinsurance, Lime Street paid out £18.3bn in claims over the year.

Along with major cat claims, the market also had to contend with a rise in non-cat losses.

According to the Lloyd’s annual report, published today, the underlying accident year combined ratio, excluding major claims, deteriorated by 4.5 percentage points to 98.4 percent.

The rise in non-cat claims was linked to underlying claims inflation, an erosion in deductibles and pricing weakness.

Lloyd’s chairman Bruce Carnegie Brown said in a statement today: “After a number of relatively benign catastrophe years, the second half of 2017 demonstrated the precarious nature of the world in which we live.”

Carnegie Brown said the market losses were “not a surprise”.

“Last year it was clear that the benign claims environment was masking the impact of tough trading conditions and so it has proved,” he said.

Prior-year releases were £706mn in 2017, compared to £1.15bn in 2016. That improved the combined ratio by 2.9 points compared with a 5.1 point uplift from reserve releases the year earlier.

Lloyd’s made an improved investment return of £1.8bn, compared to £1.3bn in 2016.

Lloyd’s CEO Inga Beale said the market faced two challenges: modernisation and improving diversity.

Beale called on the market to “speed up the adoption of the market’s modernisation programme, which will digitise processes, reduce unsustainable expense ratios, and make Lloyd’s more attractive to do business with”.

She continued: “We need to attract the best talent from around the world if we are to continue to innovate and provide customers with the products they need in today’s fast-changing risk landscape. That is why we are working hard on closing the Corporation’s gender pay gap.”