Stark news from Lloyd’s yesterday which put the current cost of the COVID-19 pandemic to the global insurance industry at $203 billion.
The figure combines the current estimated claims and the loss to the industry’s investment returns and makes sober reading.
What is of greater concern has to be the fact that Lloyd’s has predicated the figure on an easing of the global lockdown at the end of this month, warning that the costs will rise if the lockdown stretches into the second half of the year.
Lloyd’s estimates the 2020 underwriting losses covered by the industry as a result of COVID-19 at approximately $107 billion. That figure will need to be combined with falls in investment portfolios of an estimated $96 billion, bringing the total projected loss to the insurance industry to $203 billion
The market’s CEO, John Neal, (pic) said the Lloyd’s market alone would shoulder up to $4.3 billion of the claims arising out of the pandemic.
“The global insurance industry is paying out on a very wide range of policies to support businesses and people affected by COVID-19,” he said. “The Lloyd’s market alone is currently expected to pay claims amounting to some $4.3 billion, making it one of the market’s largest pay-outs ever. What makes COVID-19 unique is the not just the devastating continuing human and social impact, but also the economic shock. Taking all those factors together will challenge the industry as never before, but we will keep focused on supporting our customers and continuing to pay claims over the weeks and months ahead.”
Christopher Croft, CEO of broker representative body LIIBA, said the figures whilst significant could not cloud the fact that they represented a huge number of individuals and businesses that had suffered significantly due to the pandemic.
“While it’s important to quantify the impact of Covid -19 on the market, the danger with industry numbers is that we focus too much on dissecting them at the macro level, talking about loss ratios and capital adjustments, and not enough on the experience of the individual businesses underlying them,” he explained. “We must not lose sight of the fact that this number is a culmination of clients in crisis. It is not just about the money: our members are using all their skills and experience to help these businesses survive what are exceptionally challenging times. This is our chance to bring compensation and support into each business’s story.”
However, Lloyd’s also announced they are working hard to find new ways to support clients as the industry’s reputation alongside its balance sheet continued to take a battering.
Mr Neal said Lloyd’s plans to announce a series of further initiatives in the coming weeks as it continues to work with government, industry, and business to support the short, medium and long-term response to COVID-19.
One that has sparked the interest of many is the suggestion of the creation of “Recover Re” which will be an insurance vehicle offering “after the event” cover for pandemic related business recovery, including the current COVID-19 pandemic.
How this will work or the way it will be shaped has not been revealed but it is a signal that the market is acutely aware that unless global businesses are provided with greater support from governments and the private sector the levels of risks that industry will have to underwrite once the pandemic has been addressed will be significantly less than anyone will have hoped.