U.S. insurance buyers who shop in the surplus lines market for hard-to-insure risks will be buying from U.S.-based surplus lines insurers now that Lloyd's of London, a big player in that market, is expected to reduce the amount of business it writes in the United States.

The expected reduction comes on the heels of huge losses in the liability market that have driven some Lloyd's investors, called Names, into bankruptcy. They have been lifted up as examples of London's nouveau poor, or upper class paupers.While most of Lloyd's losses have been on the liability side, the underwriting society has decided to curtail overall losses by reducing activity in a market where heavy losses occur - the property casualty lines of business.

Lloyd's Chairman David Rowland is heading a refurbishing of the famous insurance society's role in the worldwide insurance mart. However, Mr. Roland and Lloyd's counsel have remained tight-lipped about Lloyd's role in the United States' market.

Last year, U.S. insurers paid out $23 billion for catastrophes, including losses from Hurricanes Andrew and Iniki, a winter storm that ripped through the East Coast, and the Chicago flood. So far this year, insurers have paid out $4.5 billion for catastrophes including the World Trade Center bombing. The figure doesn't include the wind, hail and tornadoes that struck Texas Sept. 13, according to the Property Claims Services Division of the American Insurance Services Group in New York.

"For years, Lloyd's tended to be more property inclined. Its appetite increased for general liability five years ago, which has caused some of the syndicates to close," said Joseph Walsh, chairman of American Empire Surplus Insurance Co. in Cincinnati, Ohio.

"Lloyd's capacity is going to shrink. If it were to diminish by a significant amount, the rest of surplus lines would have to step up to the line and take over," Mr. Walsh said.

However, general liability, unlike property casualty insurance, is expected to be snapped up by the standard market, where most insurance is written, Mr. Walsh said. "The general liability standard market is still extremely competitive," he said.

Others in the surplus lines industry said their counterparts should temper their enthusiasm about Lloyd's business strategy. Lloyd's is "in the middle of a new strategy. Before a prognosis can be given we'll have to let time run its course," said Ralph Palmieri, president and chief operating officer of First State Insurance Co. in Boston.

Surplus lines insurers say they have enough financial backing to handle the expected influx of business. Experts can't estimate how much new business the U.S. surplus lines would get because no one knows how much business Lloyd's does in this country on a surplus lines basis.

Still, there are surplus insurers who say they will avoid taking on any new property catastrophe insurance. "We're going to hold our position not to write any property catastrophe. It is our philosophy that if you can't get sufficient catastrophe reinsurance, avoid it all together," said Gordon Hoyt, president of Hermitage Group in White Plains, N.Y.

Insurers' inability to find sufficient protection for the catastrophe insurance they provide is another problem that is leading to the overall shortage of catastrophe property coverage.