Gross premiums in the London market fell 15% in 2004 to £21.7bn, according to UK financial services lobby group IFSL.
The IFSL said this followed five consecutive years of growth during which premiums increased by more than 80%.
In 2004, Lloyd's generated 54% of known London market gross premiums with the company market generating 44% and P&I clubs the remainder.
The IFSL said in its report that the insurance market was the largest in Europe and third largest in the world in 2004 with premium income totalling over £150bn.
This was, however, down 3.4% on the previous year and 16.5% below the record premiums generated in 2000.
UK long-term insurance premium income totalled £110.2bn in 2004, down 2.4% on the previous year.
IFSL said the insurance sector accounted for 2.3% of UK GDP in 2004, although this excluded brokers and other auxiliary professions.
It added that the industry employed 325,000 people in 2004, including 40,000 in the London market.
Employment was down 10% due to post-merger rationalisations and cost cutting in the insurance arms of large financial institutions.
