Lloyd’s has unsurprisingly swung to a £900 million loss for 2020 (2019: £2bn plus profit), including net incurred COVID-19 losses of well over £3bn after reinsurance recoveries.
“While 2020 will forever be remembered as the ‘year of COVID-19’, the market has suffered threats from two other fronts: the first has been the uncertainty and turmoil driven by Brexit; the second being a significant increase in the number of natural catastrophe events,” said Lloyd’s CEO John Neal.
“2020 was the fifth largest catastrophe year on record, with twenty-eight insured events costing more than £1bn each. By way of comparison, in 2017 (the year of Hurricanes Harvey, Irma and Maria), there were eighteen of these insured events.”
Lloyd’s said pay outs related to COVID-19 last year are forecast to reach £6.2bn on a gross basis, while COVID-19 claims added 13.3% to the market’s combined ratio of 110.3%.
Overall the combined ratio swelled to 110.3 % (2019: 102.1%). However, Lloyd’s pointed out that excluding COVID-19 claims, the market’s combined ratio has shown substantial improvement at 97.0%, down from 102.1% in 2019.
2020 saw premium rate increases of 10.8% with positive rate momentum continuing in the first quarter of 2021.
Neal placed sustainability at the heart of Lloyd’s vision for this year:
“Looking ahead to 2021, it is clear that our purpose of sharing risk to create a braver world has never been more important. That is why we are placing ‘purpose’ as our fourth strategic pillar alongside performance, digitalisation and culture. Fundamentally, it means ensuring our market is set up for long term sustainability, that we continue to innovate new products and services, and that we continue to build the trust of our customers.”
“As the world shifts from the tangible to the intangible, amid rapid digitalisation and economies rebuilding in the aftermath of the pandemic, we must build back not only better, but braver, with sustainability at the core of our decisions and actions,” he added.
“In December 2020, we published Lloyd’s first Environmental, Social and Governance (ESG) Report, setting out our plan to transition to a more sustainable (re)insurance marketplace. The report builds on Lloyd’s existing ESG work with a comprehensive market-wide strategy that aligns with the United Nations Sustainable Development Goals and supports the principles set out in the Paris Agreement. Importantly, we have made a number of underwriting and investment commitments to support the global transition to net zero.”
“While we work towards a much greener future, Lloyd’s has a unique position and opportunity to bring together communities, businesses, insurers and governments. In 2020 we committed £15m in seed capital investment to build and launch Futureset, our new global platform dedicated to driving greater societal and economic resilience in the face of an increasingly uncertain future.”
“Throughout 2021, Futureset will focus on the landscape of systemic risk, as well as examining the growing global risks brought about by climate change – and most importantly, driving the delivery of sustainable solutions.”
Lloyd’s said it maintains strong capital and solvency positions, with net resources increasing to £33.9bn in 2020 and a central and market wide solvency ratios of 209% and 147% respectively.