Covid-19: Insurance market Lloyd's of London to payout biggest amount of claims since 9/11

Insurance market Lloyd’s of London has said it expects to pay out up to £5bn ($6.5bn) for coronavirus-related claims.

Back in May, the insurance company said they would probably be paying out $3bn to $4.3bn (£2.5bn to £3.5bn) in Covid-related claims.

However, since then this figure has more than doubled.

It left CEO John Neal saying the first half of the year had been “exceptionally challenging”.

Neal said: “The first half of 2020 has been an exceptionally challenging period for our people, our customers, and for economies around the world.

“The pandemic has inflicted catastrophic societal and economic damage calling for unparalleled measures to stifle the spread of the virus, and to get businesses and economies back on their feet.”

“It’s a real issue, isn’t it, when you look at systemic and complex risk, whether it’s business interruption, or cyber, or climate.”

“And that’s why we’ve been very engaged with government to say: ‘Look, [this is] what can we do as an industry, and what can you do, to ensure that businesses and people are better protected when these events come along’.”

Mr Neal said the court judgement on the FCA case was due next Tuesday, and that would be “good for customers, and good for the industry, so everyone knows exactly where they stand as to what is covered and what isn’t covered”.

He said that while there were also court cases in the US to try to determine whether businesses are covered for the pandemic, the risks to insurers of an unfavourable ruling is “in the hundreds of millions, not the billions”.

He added: “The reality is, and it’s unfortunate, the vast majority of policies do not provide cover for this type of loss, and we’re as bothered by that as anything, to try and make sure that next time around, whatever the event, customers have had the opportunity to buy the right products and services.”

Lloyd’s reported a half-year loss of £400m compared with a £2.3bn profit in the first half of 2019.

While coronavirus-related payouts could be up to £5bn, Lloyd’s reinsurance covers £2bn of that amount.

Insurance costs for Covid-related payouts include event cancellation, travel, trade credit and business interruption policies due to the virus.

The pandemic has pushed up losses at insurance firms globally, with restrictions and knock-on effects prompting across-the-board claims for business closures in particular.

Lloyd’s had previously said that payouts would be on par with those paid after 11 September, 2001 and the combined impact of the 2017 Atlantic hurricane season, when it dolled out billions in insurance claims.

And losses due to the pandemic could stretch into future years, chairman Bruce Carnegie-Brown said. “Nobody knows when it started, we certainly don’t know when it’s going to end.”

 


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