Lloyd’s syndicates have been hit by claims of well over 2 billion in the first half of the year with the expectation that the figure will double for the full year.
The market issued its interim results today saying it expects to pay out up to £5 billon in COVID-19 customer claims on a gross basis.
CEO John Neal described the first half of the year as “exceptionally challenging as Lloyd’s reported a loss of £400 million driven by £2.4 billion of COVID-19 claims after reinsurance recoveries.
COVID-19 losses added 18.7% to the market’s combined ratio of 110.4%. The market said excluding COVID-19 claims, the market’s combined ratio had “shown substantial improvement” at 91.7%, down from 98.8% in H1 2019. It included a 7.1 percentage point improvement in the attritional loss ratio which has dropped to 52.6%.
Mr Neal said: “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 increased 1.7% to £20 billion year on year. However, eliminating foreign exchange rate movements, overall premium increased by just 0.1%.
Lloyd’s said positive rate momentum accelerated in the first six months of 2020, with the market achieving average risk adjusted rate increases on renewal business of 8.7%. This was offset by an 8.6% decrease in business volumes across the market, “reflecting the market’s focus on the quality of the business it renews and underwrites”.
The expense ratio for the first six months dropped marginally from 38.1% to 37.7%, with the Future at Lloyd’s programme seen as central to tackling total acquisition costs and administration expenses.
“Lloyd’s strong capital and solvency position ensures it can withstand the ongoing impacts of COVID-19,” said the market in a statement. “The market’s net resources increased by 7.2% to £32.8bn as at 30 June 2020, reinforcing the exceptional strength of Lloyd’s balance sheet and a central solvency ratio of 250%, which is expected to be at 200% for the second half of the year.”