Lloyd's Projects Industry COVID-19 Underwriting Loss at $107 Billion

The Lloyd's market says that it anticipates paying out $3 billion to $4.3 billion to global customers as a result of COVID-19 losses. Meanwhile, Lloyd's projects that the overall non-life insurance industry will face $107 billion in underwriting losses.

Lloyd's said that its expected claims payments are in line with losses paid after the September 11, 2001, terrorist attacks, and the combined impacts of Hurricanes Harvey, Irma, and Maria in 2017. The losses could rise if existing lockdowns continue into another quarter, Lloyd's said.

"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 Lloyd's statement said.

The statement said Lloyd's analysis of the non-life insurance industry impact of the COVID-19 pandemic was based on an economic study looking at both underwriting losses and the reduced value of insurance companies' investments. The study included the forecasted drop in worldwide gross domestic product.

Lloyd's said the industry's projected $107 billion in underwriting losses as a result of COVID-19 are on par with some of the biggest major claims years for the industry, such as years with three catastrophic windstorms like 2005 with Hurricanes Katrina, Rita, and Wilma and 2017 with Hurricanes Harvey, Irma, and Maria. "Importantly, these natural catastrophes were geographically constrained events, occurring over the course of hours and days—vastly different in nature to the global, systemic, and longer-term impact of COVID-19," the Lloyd's statement said.

COVID-19's impact on the industry will be compounded by the impact on insurers' investment portfolios estimated at $96 billion, bringing the total projected loss to the industry to $203 billion, Lloyd's said.

"What makes COVID-19 unique is not just the continuing human and social impact, but also the economic shock," John Neal, Lloyd's CEO, said in the statement. "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."