LONDON (Bloomberg) — Lloyd's of London may find that more underwriters lead to shrinking profit after last year's record as Goldman Sachs Group Inc. and Maurice (Hank) Greenberg join newcomers flocking to the world's largest insurance market.

Chief executive officer Richard Ward has asked underwriters doing business at 320-year-old Lloyd's to sell less insurance in 2008 to prevent prices and earnings from falling. The market announced today that 2007 pretax profit rose 5.2 percent to £3.85 billion ($7.7 billion).

Ward's calls for restraint collided with resurgent interest in the Lloyd's market, where 75 underwriting syndicates, the most since 2002, are insuring everything from satellites and airplanes to art and jewellery. New York-based Goldman, the largest US securities firm, is selling reinsurance through Lloyd's for the first time, while Greenberg's C.V. Starr & Co. is starting its second underwriting group. In all, nine new ventures are in operation this year, the biggest increase in at least 15 years.

"Clearly rates are softening," said Dane Douetil, CEO at Lloyd's insurer Brit Insurance Holdings Plc in London. "Margins are still very good, but they are being eroded by an excess of capital by a lot of specialist players."

The absence of major US hurricanes for the past two years is putting pressure on Lloyd's insurers to roll back rate increases that followed Hurricane Katrina in 2005. Net claims for catastrophes were £501 million in 2007. That compares with £3.85 billion in 2005, which surpassed Lloyd's toll from the terrorist attacks of September 11, 2001.

London-based Amlin Plc, the largest Lloyd's insurer by market value, said rates in January fell eight percent from a year earlier.

"This year we are going to have to tighten our belts a bit," Lloyd's chairman Peter Levene said in an interview yesterday. "People who want to come into the market and meet our standards and bring in new business are welcome. They all need to understand that writing more business every year is not what it's all about. What we need to do is ensure that they end up writing new business that gives them a profit."

Lloyd's 2007 investment returns, which rose to 5.6 percent from 4.7 percent in 2006, also helped profit. Lloyd's combined ratio, or claims and expenses as a percentage of premiums, was 84 percent in 2007, up from 83 percent in 2006. The lower an insurer's combined ratio, the more profitable is its underwriting.

Ward, who left the International Petroleum Exchange to head Lloyd's in 2006, said the conditions that led to record earnings in 2007 can't be expected to last.

"Lloyd's is in good shape to meet the challenges that face us, but we cannot expect the strong underwriting conditions and low levels of catastrophes to continue," Ward, 51, said today.

Lloyd's earnings may have peaked for the next several years, said Charles Coyne, an analyst at KBC Peel Hunt Ltd. in London. "The problem is that there are too many new syndicates."

Ward said the newcomers won't overwhelm plans to limit capacity. "Those new entrants see business opportunities in placing risks inside Lloyd's," Ward said in an interview. "They represent less than five percent of capacity," he said.

Lloyd's, started as a coffee shop in the 1680s where merchants and shippers traded news, uses brokers to spread risk between underwriting units known as syndicates. About 94 percent of sales this year will be backed by corporate members, and the rest by individual investors known as "names."

"Lloyd's is a very different place than it was five or 10 years ago," said Stephen Catlin, the CEO of Bermuda-based Catlin Group Ltd. "The quality of people in the market, the quality of management and the quality controls have all improved hugely. The real test will come in the next two to three years as rates come under pressure."

Goldman announced last November it was setting up a syndicate sponsored by London-based Whittington Group. The syndicate, which reinsures property, may have as much as £65 million in sales this year, according to a report by reinsurance broker Guy Carpenter.

Ian Barrett, a spokesman for Whittington in London, declined to comment. Goldman spokesman Ed Canady in New York wasn't immediately available for comment. Greenberg, the former CEO at New York-based American International Group Inc., the world's largest insurer by assets, is also expanding at Lloyd's. His C.V. Starr investment vehicle, a venture with private equity company First Reserve Corp., set up a new syndicate to underwrite energy and property risks. It will insure as much as £30 million of coverage this year, according to Lloyd's website. Ken Fryman, a spokesman for New York-based C.V. Starr, wasn't immediately available to comment.

Bermuda-based Aspen Insurance Holdings Ltd. has a new syndicate that plans to underwrite $100 million this year, covering energy, marine, aviation and reinsurance risks. Argo Group International Holdings Ltd., also based in Bermuda, agreed yesterday to buy Lloyd's insurer Heritage Underwriting Agency Plc for £136 million.

Lloyd's completed a reinsurance agreement last year with Warren Buffett's Berkshire Hathaway Inc. to limit potential asbestos claims. Buffett assumed as much as $7 billion of risks held by former investors in Lloyd's of London. In return, Berkshire Hathaway is paid a premium and gets $8.7 billion already set aside by Equitas Inc. for claims before 1993.

The deal improved Lloyd's finances, according to Standard & Poor's, which lifted its rating one level last year to A+. Lloyd's also raised £500 million of new capital in July 2007 before credit markets seized up, reducing members' costs.

"Lloyd's hasn't been in such good health in the last 25 years," said Ewen Gilmour, CEO of Lloyd's insurer Chaucer Plc.

Lloyd's, which generally doesn't insure bonds or mortgages, had 90 to 100 claims or notifications relating to the collapse of the sub-prime market, finance director Luke Savage said at the press conference yesterday. These generally pertain to coverage for corporate directors and officers, he said.

"We now write a fraction of the kind of financial-institutions business that we used to," Savage said.