The global insurance industry is facing losses in excess of $200bn (£165bn) this year as the coronavirus crisis triggers record payouts while slashing investment values, Lloyd's of London has warned.
The re/insurance market said that it expects insurers to suffer underwriting losses of around $107bn as a result of COVID-19, which would be on par with some of the biggest claim years ever recorded.
In addition, unlike in other years, the industry is likely to experience falls in investment values of approximately $96bn, bringing the total projected loss for the sector to $203bn.
Lloyd’s said that the cost of coronavirus to the global insurance non-life industry is likely to be “far in excess” of the losses recorded after the 9/11 attacks in 2001 and hurricanes Harvey, Irma and Maria in 2017.
“What makes COVID-19 unique is the not just the devastating continuing human and social impact, but also the economic shock,” said Lloyd's CEO John Neal. “Taking all those factors together will challenge the industry as never before.”
The forecasts consider anticipated payouts amid continued social distancing and lockdown measures through 2020, as well as the predicted drop in GDP globally.
A comparison between projected COVID-19 losses and those from other historical events is shown below:
Lloyd’s said that it expects to pay between $3bn and $4.3bn to its global customers as a result of the coronavirus pandemic.
It warned that previous events, such geographically contained natural catastrophes occurring over the course of hours or days, were “vastly different” in nature to the global, systemic and longer-term impact of COVID-19.
In response, Lloyd's has devised a £15m support package for charitable organisations dealing with the pandemic, and will fast track development of insurance products to support the response to COVID-19.
It plans to announce a series of further initiatives in the coming weeks, and is looking at establishing a ‘Recover Re’ insurance vehicle offering 'after the event' cover for pandemic related business recovery, including the current COVID-19 pandemic.
Author: Chris Seekings