Lloyd’s expects to pay $6.5bn of COVID-19 claims

Lloyd’s of London expects that it and its members will pay around $6.5 billion of gross claims from the COVID-19 pandemic, with around 40% of the total expected to be covered by reinsurance.

Lloyd’s had previously forecast that it expected its own portion of the non-life insurance market claims is expected to be from $3 billion up to $4.3 billion, as it pegged the industry as whole would face around $107 billion of claims falling to the non-life insurance and reinsurance industry.

Announcing its half-year results this morning, Lloyd’s said that COVID-19 claims so far have driven it to a loss for the first-half, as around $3.3 billion of claims have been registered, adding 18.7% to the combined ratio and taking the market’s total for H1 to 110.4%, driving it to a roughly $520 million loss for the first- six months.

If you exclude the effects of COVID-19 claims, Lloyd’s combined ratio is actually much improved at 91.7%, down from 98.8% in H1 2019. The attritional loss ratio has improved by 7.1%, falling to 52.6%.

John Neal, Lloyd’s CEO commented, “The first half of 2020 has been an exceptionally challenging period for our people, our customers, and for economies around the world. The pandemic has inflicted catastrophic societal and economic damage calling for unparalleled measures to stifle the spread of the virus, and to get businesses and economies back on their feet. Our half year results demonstrate that our robust approach to performance management and remediation has begun to take effect, evidenced by a significant turnaround in the underlying performance metrics, which give the truest indication of our market’s profitability.”

Gross written premiums for Lloyd’s are up slightly at around $26 billion for the first-half, while investment income suffered, likely on the capital markets volatility due to the pandemic, with a return of just 1.2% much lower than the prior year’s 3.2%.

Lloyd’s has the resources to support the continued flow of COVID-19 claims from the pandemic, with around $42.7 billion of net resources available to it, up from just under $40 billion at the end of 2019.

With 40% of the COVID-19 burden to be covered by reinsurance, it would leave Lloyd’s with a net claims load of around $3.9 billion from the pandemic, aligned with its earlier forecasts.