A new report by Syndicate Research Limited (SRL) has claimed that COVID-19 losses will be “entirely manageable” for re/insurance marketplace Lloyd’s of London in light of the investment market’s recovery.
The Lloyd’s Market has estimated pre-tax underwriting losses from COVID-19 of £2.5 billion to £3.5 billion, equivalent to 9.7% to 13.6% of 2019 Net Premium Earned (NPE).
SRL, which provides in-depth research on all trading syndicates operating in the Lloyd’s market, compared this to the previously reported Lloyd’s 2019 combined ratio of 102% including major losses of 7% NPE.
For the overall market, SRL therefore considers that the COVID-19 losses announced by Lloyd’s are manageable when taking into account the benefit of 2019 profits, the recovery of the investment markets and the unencumbered nature of Lloyd’s Central Fund.
Analysts believe there is potential for Lloyd’s to record only a small loss for 2020 based on an average run of major losses and investment markets remaining at current levels.
But looking at the impact on individual syndicates, these losses come at a stage when several weaker performing syndicates have failed to achieve profitability for several years.
COVID-19 represents a material loss in H1, prior to potential additional Catastrophe losses during the main hurricane season.
To that extent, SRL believes that the losses could be significant for certain underperforming syndicates and their potential recapitalisation by existing capital providers.
The recovery of the investment markets also means that the impact of re/insurance market conditions could change, SRL added, possibly slowing the momentum of hardening premium rates.