LONDON -- Bermuda's insurance market is putting growing pressure on Lloyd's of London.

Lloyd's is feeling the heat of competition in its non-marine market sector.

Competition has also intensifed in its three other major sectors -- marine, aviation and motor, Lloyd's said.

And only the low incidence of catastrophes has so far saved most underwriters from a possible return to losses.

The news comes as Lloyd's of London chairman Max Taylor yesterday enjoyed the market's best ever result -- and sought to maintain the momentum for change begun by his predecessor.

"There's an inherent danger in reading into the 1995 result any indications as to the 1998 performance,'' Taylor told a news conference after Lloyd's announced a 1.149 billion ($1.9 billion) record profit for 1995.

Cost cutting, improving market access and distribution, building Lloyd's global position and enhancing service and standards were the priorities now that the market had put the worst crisis in its 310 years behind it.

"I'm delighted people are picking up on the issues we've highlighted recently. Lloyd's has a tremendous amount to do if we're to compete with the Travelers and Citigroups of this world,'' chief executive Ron Sandler told Reuters.

Profits were in line with forecasts, but rejoicing among the market's backers will be tempered by the memory that in its darkest hour in the mid-1990s, Lloyd's was announcing annual losses of over 2.0 billion.

Lloyd's, which reports market results three years in arrears, swung back into the black on its 1993 year with a profit of 1.084 billion after clocking up a total deficit of around 8.0 billion in the years 1988-92.

Investors will also be mindful of Lloyd's forecasts for 1996 and 1997, which show profits falling to 574 million and 366 million respectively, in line with a cyclical downturn in the insurance industry as a whole.

"Projections for 1996 and 1997 show a reduction in profitability, reflecting lower rating conditions. Regrettably, in 1998, conditions are tougher still,'' Taylor said in a statement with the results.

"Underwriters will need to use all their skill and ingenuity to produce profits at the current time and we must prepare for the likelihood that some will not be able to do so.'' Competition has intensified in its four major market sectors -- marine, non-marine, aviation and motor -- Lloyd's said.

Marine is expected to show only a marginal return in 1998, while non-marine is coming under growing pressure from new insurance markets such as Bermuda.

The cyclical downturn in aviation began in 1996, later than in other market sectors, but surplus capacity is preventing a recovery in rates.

Lloyd's mainly British motor business reflected the market as a whole and is expected to show losses for 1996 and 1997, "although there is some optimism that there will be an improvement in 1998 as rates increase.'' Sandler said the reborn Lloyd's was out not only to compete for its existing market share, but also in the longer term to expand.

"Getting our costs down is a priority if we are to compete effectively in future. But it's also about growth.'' Lloyd's received a fillip in the form of an A (excellent) rating from A.M.

Best in respect of the market's relative financial strength and performance.

US rating agency Best said its decision was based on the latest result and a comprehensive review it had carried out of Lloyd's.

However, Lloyd's is still haunted by its past problems and will have to write off some of the outstanding 550-600 million owed to it by traditional backers, known as Names, who suffered heavy losses in the period 1988-92.

"Many Names have told us they are unable to pay and a considerable proportion of the debt is not available to be collected,'' Sandler said.

The Lloyd's of London Corporation, the organisation which runs the insurance market, cut expenditure to 182 million ($303.3 million) last year from 223 million in 1996.

The corporation said it was well placed as a service provider now that Lloyd's had moved beyond the losses and problems which almost destroyed it in the mid 1990s.

"In a rapidly changing environment, there is an exciting opportunity ahead for Lloyd's with its distinctive positioning in world insurance markets,'' chief executive Ron Sandler said.

The sizeable fall in spending in 1996 was due partly to exceptional outgoings in 1996 associated with the reconstruction and renewal programme.

The average number of people employed by the Lloyd's Corporation in 1997 fell to 1,880 from 2,076 the previous year.

Lloyd's has brought in consultants Coopers & Lybrand to see how further cost savings can be achieved in its back office operations.

LLOYD'S AT A GLANCE 1.149 billion ($1.9 billion) record profit for 1995; '96, '97 forecasts: 574m and 366m; A (excellent) rating from A.M. Best; Lloyd's of London Corporation '97 expenditure: 182m; Lloyd's Corporation employees in '97: 1,880