Will Coronavirus Spell the end of the City as we Know it?

The global insurance sector and its clients are in the midst of a battle for survival as the world continues to fight the Covid-19 pandemic.

Many analysts say the biggest financial pain for the industry will be the impact on their investments and with it their ability to meet solvency requirements.

The most tangible effect however has been the move by many insurers and brokers to send their staff home to work remotely as the medical advice remains around social distancing and isolation.

Yesterday the Lloyd’s market closed its underwriting room for the foreseeable future. It came a week after the market has undertaken a resilience test which saw the room close for the first time in its 300 year plus history. Covid-19 has achieved what the Spanish Flu and two world wars had failed to do.

Lloyd’s CEO John Neal revealed that on Monday around 1,000 people used the underwriting room and by Wednesday there were fewer than 200 people at work. The underwriting room normally hosts around 5,000 brokers and underwriters a day.

The City of London has become a virtual ghost town as have many financial districts across the world.

UK Prime Minister Boris Johnson said yesterday that the minimum period that the country could expect to be asked to keep their distance was 12 weeks and while he hoped that would be enough he could make no promises that the country could come out of their homes by the end of June.

London has built its name on the ability for brokers and underwriters to meet face to face given the physical concentration of staff in EC3.

However for three months that will not be the case and like it or not business will need to be transacted remotely and negotiations between underwriter and broker will be carried out on line, via phone of video links.

If after three or four months staff can return to their offices what is to say that bosses will not have a long hard look at whether they need to have so many staff occupying such expensive real estate?

Also it is likely there will be some interesting conversations once the pandemic has passed, when underwriters or brokers seek permission to spend thousands of pounds to head out to Asia or the USA to visit clients who they have been successfully serving via video conference for the past quarter or more.

It is likely that the world will have changed by the time the war against Covid-19 has been won.

Yesterday Lloyd’s closed its underwriting room for the foreseeable future.

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