The coronavirus hit to Lloyd’s of London is expected to top £6bn in claims paid, with the impact of the pandemic enough to push the specialist insurance market to its worst underwriting result in three years.
The syndicates that make up the Lloyd’s market have faced mounting payouts for business interruption, event cancellation and other claims arising from the pandemic and the measures taken by the government aimed at restricting its spread.
Like any other financial institution, Lloyd’s itself has been disrupted. After closing for a second time in January, the underwriting room — home to one of the few remaining face-to-face markets in the City of London — is due to reopen in May, albeit at reduced capacity.
Lloyd’s swung from a £2.5bn pre-tax profit in 2019 to a £0.9bn loss in 2020, it disclosed in its full-year results on Wednesday.
John Neal, chief executive, said 2020 had been “marked by a global health crisis of a scale never seen before”.
He added: “The year was also marked by a high frequency of natural catastrophe claims and the UK’s formal exit from the EU, driving further losses and uncertainty.”
Covid-related losses were £3.4bn, after monies recovered from reinsurance arrangements. The pandemic alone added 13.3 percentage points to the market’s overall combined ratio — a measure of claims and expenses as a proportion of premiums earned — taking it deeper into lossmaking territory at 110.3 per cent.
That represented the worst result since 2017, when Lloyd’s was buffeted by US hurricanes and other natural disasters.
There is a live debate at Lloyd’s, and among the insurers and brokers that make up the market, as to how it should change after the pandemic. Last week, the London & International Insurance Brokers’ Association, a trade body, set out 10 principles for the future of trading.
While it said Lloyd’s “must remain a vibrant trading space, not become the museum of modern insurance”, the LIIBA added that brokers should no longer have to “queue for simple endorsements”, and that the market’s “stuffy dress codes must go”.
The rules for what you can wear at Lloyd’s state that pass holders visiting the famous Richard Rogers-designed building should dress “appropriately”. A note in 2005 explained that as meaning “suits or smart jackets, trousers and ties for men; smart business style for women”, but in recent years these guidelines have been relaxed.
The results also provided further evidence of rising prices for commercial insurance, with premium rate increases on renewed business of 10.8 per cent. But gross written premiums dipped 1.2 per cent to £35.5bn, which Lloyd’s said reflected “the market’s continued focus on the quality of the business it renews and underwrites”.