In a statement, the group said that the increase was prompted by "well-publicized" changes in industry estimates and an increased number of notifications received in 2001. Payments, the group said, have remained modest.

The group said that much of this provision is for claims that the insurer has not yet been notified of. Noting that such claims will be paid over a period of more than 20 years, the group said that the provision for claims will be accounted for in its financial statements on a discounted basis, reflecting the time value of money. The discounted provision is ?239 million, or $340 million.

In addition, Royal & SunAlliance announced a provision for certain discontinued operations of ?145 million, or $207 million.

The group said it expects its pretax operating result to be roughly break even, including the impacts of the reserve charges and a World Trade Center loss provision of ?215 million, or $306 million.

In today's press statement, Royal & SunAlliance Group Chief Executive Bob Mendelsohn said: "The reserving actions announced today are tough, but should reduce a significant element of uncertainty in our future results."

"We have spent the past four years reshaping our business worldwide to prepare it for exactly the kind of market we see developing over the next several years. Throughout that period of change, we have carried a significant amount of ?baggage' from the past, which hurt our reported earnings.

"Our actions today will reduce much of that burden and will enable us to move forward on a stronger footing."

In response to the group's announcement, Standard & Poor's today affirmed its "single-A-plus" insurer financial strength ratings on various operating entities of Royal & Sun Alliance Insurance Group, but changed the outlook to negative from stable.

S&P said the reserve-strengthening measures announced were in excess of the rating agency's expectations, and heighten pressures on capitalization. S&P also said that the ratings affirmations are based on S&P expectation that the group will release sufficient capital, in particular from the life business, to replenish capital to levels consistent with the current ratings.

The rating agency said that failure by management to achieve strong capitalization by third-quarter 2002 is likely to result in the ratings being lowered, but that they would likely remain in the "single-A" category of insurer financial strength.