The insurance market Lloyd’s of London expects 2020 payouts for claims related to the Covid-19 pandemic to reach £6.2bn, pushing it to a loss for the year.
Lloyd’s has reported pre-tax net losses of £0.9bn for the year, blaming natural catastrophe claims and Brexit for hitting earnings alongside the pandemic. In 2019 the market made a pre-tax profit of £2.5bn.
However, it was the global disruption caused by the coronavirus that took its toll. After taking into account reinsurance policies, the net cost of Covid-19 for the market was £3.4bn.
The pandemic added 13 percentage points to its combined ratio, a measure of claims payouts and other costs versus premiums paid by customers, pushing it to 110%.
Lloyd’s sales were also down during 2020, with gross written premiums dipping to £35.5bn, £400m less than the year before. Lloyd’s said this was down to “remediation of underperforming business” as it sought to “focus on the quality” of its custom rather than volume.
The financial resources it could call on to cover claims grew during the year to £33.9bn.
John Neal, Lloyd’s chief executive, said: “Following an extremely challenging year marked by a global health crisis of a scale never seen before, Lloyd’s continued to support its customers with payouts expected to total £6.2bn in Covid-19 claims. 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.
“Against this unprecedented backdrop we have made good progress across our performance, digitalisation and culture transformation plans.”
Neal said that he expected “real success this year” and hoped that higher premiums would allow the market to grow for the first time in four years.