John Neal, Chief Executive Officer (CEO) of Lloyd’s of London, has said that the coronavirus (COVID-19) pandemic could be the most expensive event in history for the re/insurance industry.
Speaking to the Financial Times, Neal said that the crisis will likely dwarf other major disasters such as Hurricane Katrina in 2005 and the 9/11 terror attacks.
This is partly due to the wide range of exposures faced by insurers, who are set to pay out on a variety of policies, including event cancellation and management liability.
And business interruption remains a major concern, as more US states join the push to force re/insurers to retroactively cover COVID-19 losses.
Neal told the FT that the pandemic was “no doubt the largest insurance challenge the industry has ever faced, I think by some way”.
He said losses will stretch into the tens of billions, if not hundreds of billions, once the full costs of the crisis have been added up.
“The chances of the market making anything other than a notable loss in 2020 are zero,” Neal added.
At the same time, many insurers will have to refund premiums due to the economic slowdown and disruption to business operations, with Neal also putting this cost in the hundreds of millions of pounds.
Neal’s comments come alongside reports that the UK government is in discussions with industry leaders about a possible re/insurance backstop scheme.
Such a scheme would aim to prevent the widespread withdrawal of cover across trade credit sectors such as manufacturing and retail.
Neal also urged insurers to address business interruption issues following news that some insurers could soon be facing legal action over their refusal to pay out on certain policies.
“Let’s get mechanisms in place quickly so that if there is a dispute it doesn’t go for months if not longer,” Neal said, adding that insurers need to reach an agreement about how further coronavirus cases could be covered.