Lloyd’s of London falls to £400m loss due to coronavirus claims
Lloyd’s of London fell to a £400m loss in the first half of 2020 after the insurance market paid out £2.4bn in coronavirus-related claims.
In total, Lloyd’s confirmed that it would pay out up to £5bn in gross claims related to the pandemic.
Shares in the market fell 1.7 per cent this morning.
The figures
The body recorded a £400m loss, down from a profit of £2.3bn in the same period last year, largely due to losses caused by the pandemic.
Excluding COVID-19 losses, the market delivered an underwriting profit of £1bn, which it said showed a “significant improvement” in Lloyd’s underlying performance.
It was recorded gross written premiums of £20bn, up a small amount from £19.7bn the year before.
Lloyd’s said that its combined ratio, a key metric of performance for insurance firms, stood at 110.4 per cent.
Excluding Covid-19 claims, the market’s combined ratio has shown substantial improvement at 91.7 per cent, down from 98.8 per cent in 2019.
If a firm’s combined ratio is over 100 per cent, it means it had more losses plus expenses than earned premiums and lost money on its operations.
In the first six months of the year, the market’s net resources increased by 7.2 per cent to £32.8bn, showing the strength of Lloyd’s balance sheet with a central solvency ratio of 250 per cent.
Why it’s interesting
Speaking to Morning Wire, Lloyd’s chairman Bruce Carnegie-Brown said that the pandemic ranked alongside the 9/11 terror attacks and recent hurricane seasons as one of the worst events the industry had seen.
He said that it would cost the whole industry an estimated $107bn, of which Lloyd’s £5bn in claims was “in line with our market share”.
Although there remains a great deal of uncertainty as to when and how the pandemic will end, Carnegie-Brown said the payout figure would not continue to grow indefinitely.
“It’s likely that claims will continue to develop, but of course it’s also true that most insurance policies have a limit on the total claims they can pay for any particular event, and therefore at some point that becomes exhausted, no matter how long the pandemic is”, he said.
Last week Lloyd’s reopened its underwriting room for the first time since March, with a capacity of around 45 per cent due to social distancing measures.
Carnegie-Brown said that there were several hundred people in the building at the moment, down from the 4,000 to 5,000 prior to the pandemic.
On its reopening, brokers were met with protestors calling on firms to divest from underwriting claims for coal and tar sands products.
Carnegie-Brown said that individual firms were responsible for what they choose to write claims for, but added that Lloyd’s had commissioned a report into the issue.
“We have to have the findings on by the end of the year and I think that will kind of inform exactly where we are across the market in terms of how much of this kind of business we do”, he said.
“And I think what we’d like to do then is to translate that into policies which reduce the impact of our underwriting support for things that have a negative impact on on climate”.
What Lloyd’s of London said
John Neal, Lloyd’s chief executive, 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.
“Our half year results demonstrate that our robust approach to performance management and remediation has begun to take effect, evidenced by a significant turnaround in the underlying performance metrics, which give the truest indication of our market’s profitability.”