Lloyd’s asks members hit hard by COVID-19 to accelerate capital injections

The specialist insurance and reinsurance marketplace Lloyd's of London has reportedly asked its members, who have suffered sizable losses related to COVID-19, to accelerate capital injections.

According to S&P Global Ratings analysts, Lloyd's request to currently undercapitalised members is a "practical measure to maintain the market's pre-COVID-19 levels of capital in uncertain times".

The analysts believe that capital injections will help stabilise the market's capital position as the market might experience more substantial losses if the pandemic extends for a more significant part of 2020.

Based on its risk-based model, S&P expects Lloyd's capital adequacy to remain close to or above 'AA' level over 2020 and return to levels closer to 'AAA' level in 2021.

It noted that Lloyd's solvency ratio stood at 156 percent on a marketwide basis and 238 percent on the central Solvency basis at year-end 2019. S&P expect that these ratios will have dropped year-to-date 2020, but expect them to rebound to very close to 2019 levels at half-year 2020 based on Lloyd's recapitalisation process.

Lloyd's market is said to have suffered material investment losses to date due to falls in the equity market and widening credit spreads in the bond market.

As a result of the pandemic, Lloyd's has endured losses on its underwriting portfolio, mainly relating to event cancellation cover and pandemic business interruption cover.