After three years of profits, investors in Lloyd's of London have been put on notice that one catastrophe anywhere in the world would once again plunge the market back into the red. Mr Marcus Rivaldi, one of its researchers has forecast that the market will make "wafer-thin" profits of only 2.9 per cent of its capacity in 1998. So small is the margin of profitability that a significant catastrophe would once again incur losses for investors.

Lloyd's reports its profits with a three-year time lag. It has already warned that it expects conditions to get tougher in 1998. The market has told underwriters that they will need to use all their "skill and ingenuity" to make profits this year.