LONDON (Reuters) – Lloyd’s of London is likely to pay out $3-4.3 billion (£2.5-3.5 billion)in claims related to the coronavirus pandemic and underwriting and investment losses for the global non-life insurance sector could reach a record $203 billion, Lloyd’s said on Thursday.
FILE PHOTO: A worker enters the Lloyd’s of London building in the City of London financial district, London, Britain, February 1, 2018. REUTERS/Simon Dawson/File Photo
Insurers across the globe have suffered losses from the virus, which has locked down economies, bringing businesses, events and travel to a halt.
Reinsurer Swiss Re (SRENH.S) said last month it took a hit of $476 million for anticipated and actual pandemic-related claims, whie German insurer Allianz (ALVG.DE) this week reported a nearly 30% drop in first-quarter profit.
In a double blow, insurers have also lost money due to falling markets, slashing the investments they use to pay out claims.
“I don’t think anyone in our industry has ever seen both happen at once,” Lloyd’s Chief Executive John Neal told Reuters.
Insured losses are likely to total $107 billion, similar to natural catastrophe losses in 2005 led by Hurricanes Katrina, Rita and Wilma and to 2017 including Hurricanes Harvey, Irma and Maria, Lloyd’s said.
Investment losses are seen at $96 billion.
Its estimates do not include life insurance and assume continuing social distancing and lockdown measures in 2020, as well as a drop in global GDP.
The bulk of the insurance losses come from cancellation or postponement of major events around the world including the Olympics, business interruption claims on property insurance and trade credit.
Small businesses in Britain are battling insurers who they say have denied them payments for disruption. The insurers say most small business policies do not cover the pandemic.
Lloyd’s of London insurer Hiscox (HSX.L) is one of those under scrutiny.
Neal said the UK domestic property sector accounted for less than 2% of the Lloyd’s market, adding that “any valid claims should be paid”.
The crisis is also throwing up opportunities for new products. Lloyd’s is insuring clinical trials and is considering “Recover Re” after-the-event long-term insurance to help businesses recover from pandemics, including COVID-19.
The underwriting floor at Lloyd’s, a focal point for the market which employs nearly 50,000 people, was unlikely to open before August, Neal said.
But some of Lloyd’s’ own staff could start returning to its City of London tower in June, he added.
Reporting by Carolyn Cohn;Editing by Elaine Hardcastle