He said that many insurers had become over-reliant on investment income to drive their bottom line, but have realized that such strategies no longer work.

In a statement on the Lloyd’s website he said "in the absence of meaningful investment income in 2009 insurers must now underwrite for a technical profit.”

The combination of heavy catastrophe losses in 2008 and poor investment performance caused widespread capital erosion, emphasizing underwriting performance this year.

Mr. Savage added: “I think the two converging forces should harden underwriters’ resolve and push premium rates up.”

He said that history shows that when there is recession, claims frequency increases and so does fraud. Meanwhile, reduced economic activity means that insured values are falling. He said insurers are going to be hit by a combination of rising claims at the same time as premium volumes are slowing, adding that Lloyd’s market insurers are better placed than many to ride out this difficult period of financial and economic uncertainty.