Lloyd’s Expects to Pay £5BN for COVID-19 Customer Claims

Lloyd’s of London confirmed on Thursday that it expects to pay out up to £5 billion in COVID-19 customer claims, with the publication of its 2020 Half Year Results.

In the first six months of 2020, Lloyd’s COVID-19 claims after reinsurance recoveries totalled £2.4 billion, driving an overall market loss of £400 million.  That compared to a profit of £2.3 billion for the first six months of 2019.

But excluding COVID-19 losses, the market delivered an underwriting profit of £1.0 billion, demonstrating a significant improvement in Lloyd’s underlying performance.

John Neal, Lloyd’s CEO said via news release: “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.”

Lloyd’s reinsurance should cover £2 billion of the £5 billion in coronavirus-related payouts. But the company is likely to continue to take a hit from these losses for years to come, as chairman Bruce Carnegie-Brown said. “Nobody knows when it started, we certainly don’t know when it’s going to end.”

Gross written premiums of £20 billion represent a 1.7 per cent increase over the same period in 2019, the release said. However, eliminating foreign exchange rate movements, overall premium increased by just 0.1 per cent.

In the first six months of 2020, the market’s net resources increased by 7.2 per cent to £32.8 billion as at 30 June 2020 (FY 2019: £30.6bn), reinforcing the exceptional strength of Lloyd’s balance sheet with a central solvency ratio of 250 per cent.