Insurance

Coronavirus will be the largest loss on record for insurers, Lloyd's of London says

Key Points
  • In a broader economic assessment report on the impact of Covid-19 for the non-life insurance industry, Lloyd's of London estimated that the 2020 underwriting losses covered by the industry will hit $107 billion.
  • The British insurance and reinsurance market projected that its own Covid-19 casualty and property (C&P) claims could reach up to $4.3 billion as at June 30.
The interior of Lloyd's of London, the centuries-old insurance market, is pictured in central London on April 27, 2016.
Leon Neal | AFP | Getty Images

Lloyd's of London said Thursday morning that it expects coronavirus-related losses to the insurance sector to be the largest to date.

The British insurance and reinsurance market projected that its own Covid-19 casualty and property (C&P) claims could reach up to $4.3 billion as at June 30, and warned that this could rise further if the pandemic continues for another quarter.

In a broader economic assessment report on the impact of Covid-19 for the non-life insurance industry, Lloyd's estimated that the 2020 underwriting losses covered by the industry will hit $107 billion.

"In addition, unlike other events, the industry will also experience falls in investment portfolios of an estimated $96bn, bringing the total projected loss to the insurance industry to $203bn," the report added.

VIDEO1:2001:20
Coronavirus claims bill will likely be over $100 billion: Lloyd's of London

Lloyd's of London CEO John Neal told CNBC Thursday that any form of lockdown extending beyond the second quarter would likely result in between $1 billion and $2 billion more claims on top of its current $4.3 billion estimate.

"I don't actually think we will really know the full cost of Covid-19 maybe for up to two years," Neal told CNBC's "Street Signs Europe."

Alongside its projections for the impact on insurers, Lloyd's of London set forth a series of ideas for how they could play an active part in the recovery.

Neal said he was worried that as insurers feel the strain, "the risk is that they buy less insurance at a time when they should probably contemplate buying more."

Reinsurance is the process whereby insurers agree to transfer parts of their risk portfolios to other insurers in order to reduce the possibility of paying out a large sum from an insurance claims event.

"So at the moment, we are involved in insuring the clinical trials for the vaccine, so there are over 70 trials taking place as we speak, right up to ideas to saying 'how do we solve the second wave of the pandemic?'" he explained.

Swiss insurer Zurich on Thursday morning booked $280 million in C&P claims for the first quarter, and projected that C&P claims will rise to $750 million this year.