Lloyd's CEO Neal: COVID-19 will challenge insurance industry as never before
Specialist re/insurance market Lloyd's of London is expected to pay COVID-19 claims amounting to some $4.3 billion, making it one of the market’s largest pay-outs ever. Chief executive John Neal says the pandemic will "challenge the industry as never before".
Lloyd’s has revealed that it will pay out in the range of $3 billion to $4.3 billion to its global customers as a result of the far-reaching impacts of COVID-19, and warned that these losses could rise further if the current lockdown continues into another quarter.
The estimated 2020 underwriting losses covered by the industry as a result of COVID-19 are approximately $107 billion.
Additionally, the industry will also experience falls in investment portfolios of an estimated $96 billion, bringing the total projected loss to the insurance industry to $203 billion.
According to Lloyd's, the $3bn-$4.3bn estimates are on a par with 9/11 in 2001 and the combined impact of hurricanes Harvey, Irma and Maria in 2017, all of which led to similar pay-outs by the Lloyd’s market. The $107 billion estimates are on par with some of the biggest major claims years for the industry, such as when three catastrophic windstorms have struck (2005: hurricanes Katrina, Rita and Wilma; 2017: hurricanes Harvey, Irma and Maria).
However, it noted that these natural catastrophes were geographically contained events, occurring over the course of hours and days – vastly different in nature to the global, systemic and longer-term impact of COVID-19.
Lloyd’s believes that once the scale and complexity of the social and economic impact of COVID-19 is fully understood, the overall cost to the global insurance non-life industry is likely to be far in excess of those historical events.
“The global insurance industry is paying out on a very wide range of policies to support businesses and people affected by COVID-19. The Lloyd’s market alone is currently expected to pay claims amounting to some $4.3bn, making it one of the market’s largest pay-outs ever," said John Neal, CEO of Lloyd’s. "What makes COVID-19 unique is 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.
Neal added: “Alongside making record pay-outs, we have been turning our attention to what more we can do to support business and society through this incredibly difficult time. In addition to our £15m package of charitable donations, we have set aside £15m in seed capital to explore how the industry can create or house structures which support economic recovery and mitigate against future events of this magnitude. We are also working with our Advisory Committees to develop a number of initiatives to support our customers and economic recovery in the short, medium and long-term.”
Christopher Croft, CEO of broker representative body LIIBA, said: "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. We must not lose sight of the fact that this number is a culmination of clients in crisis. It's 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."
