LONDON (Bloomberg) ? Lloyd?s of London, the world?s biggest insurance market, may post its first annual loss since the 2001 terror attacks after the costliest hurricane season on record triggered claims of about ?2.9 billion ($5 billion).

?The chances of the market making a profit in 2005 are now small,? said Lloyd?s, an umbrella group for about 62 insurance businesses providing ?13.7 billion of coverage this year. ?The market expects to be able to meet all its liabilities.?

Payouts by the 300-year-old market will exceed claims from the September 11, 2001, terror attacks, which cost Lloyd?s about $3.3 billion in its single biggest loss. The market is expecting ?another bad year? for hurricanes in 2006, finance director Luke Savage said in an interview. Lloyd?s yesterday increased estimated net losses from Katrina to ?1.9 billion, from ?1.4 billion. Hurricane Rita will probably cost ?535 million and claims from Wilma may reach ?483 million, the market said.

Total insurance industry claims from the US hurricanes including Katrina, which damaged oil rigs, flooded New Orleans, and left hundreds dead in September, may reach $79 billion, according to Risk Management Solutions Inc.

?We don?t think there will be a material impact on the financial strength of the market,? Numis Securities analyst Richard Gradidge in London said by telephone. ?The rating agencies may revisit their credit outlooks, but it won?t affect the market?s ability to trade next year.? Savage said the market is ?financially robust? and all insurers will probably be able to meet their hurricane liabilities.

?The losses are pretty well spread,? Savage said. ?Our loss modelling is designed to make sure that no individual syndicate should be brought down by a loss of this nature.?

The September 11 attacks pushed Lloyd?s insurers into a ?3.1 billion loss in 2001 and forced them to cut sales targets. Since then, insurers have sold stock, raised money and tightened underwriting standards, in an attempt to ensure that a major catastrophe won?t threaten the market?s stability.

Companies that trade at Lloyd?s include units of Warren Buffett?s Berkshire Hathaway Inc. and American International Group Inc., the world?s largest insurer by market value. Insurers at Lloyd?s, the world?s sixth-biggest reinsurer, specialise in risks ranging from satellite coverage to soccer team liabilities.

Last year, the market posted pre-tax profit of ?1.36 billion, when it had ?1.3 billion of natural disaster claims, mostly from the four hurricanes that battered Florida in 2004.

Lloyd?s expects to boost underwriting capacity, or the amount of business it can insure next year, by seven percent to ?14.7 billion, the market said. Before the storms, capacity was forecast to decline seven percent.

Amlin, a Lloyd's underwriter, this month announced a ?224 million rights issue to fund a new $1 billion reinsurer in Bermuda to take advantage of the projected rate rises. And another Lloyd's insurer, Hiscox Plc is also setting up a Bermuda unit as is smaller syndicate Omega. And Wellington Underwriters, also a Lloyd's operation, said it could also set up a Bermuda company to take advantage of the increasing strength of the Island as a reinsurance market, and to cash in on higher pricing for policies in 2006.

?The prices of Lloyd?s stock reflects that people are looking at potential returns next year,? said Bridgewell Securities analyst Geoff Miller in London by telephone.

Higher premiums after the 2001 terrorist attacks helped Lloyd?s insurers post three years of profits starting the following year. The market had six straight annual losses through 2001. This year?s hurricanes will have an ?immaterial impact? on the market?s central fund, which steps in as a safety net when a member insurer is unable to pay claims, Lloyd?s said.

The 2005 Atlantic Ocean hurricane season ends today as the worst since record-keeping began more than 150 years ago with 26 named storms killing more than 1,300 people and causing billions of dollars of damage.