Analysts at AmWINS have suggested that the coronavirus (COVID-19) pandemic has and will continue to make already-challenging market conditions at Lloyd’s of London even more difficult.
The firm acknowledged that Lloyd’s and its syndicates had extensively tested their systems in preparation for a crisis, and said that the transition to remote working has gone “exceptionally well,” given the speed and scale of the change.
But despite the smooth transition, there are changes in how Lloyd’s is approaching business, and there is still much uncertainty across almost all lines of business.
For example, in terms of property business, policy wording and sub-limits will need to be reviewed and underwriters will try to ensure that placements are for actual physical loss or damage, with pandemic and civil or military authority coverages to be placed separately.
And for business interruption, insured will be looking to reduce their limits as business revenue drops, especially in the Hospitality sector.
This raises questions around returned premiums and how revenue can be accurately predicted with the end of the pandemic unknown, AmWINS noted, adding that mechanisms will beed to be put in place as these conditions continue to develop.
In professional lines, there have been mixed responses among carriers to the coronavirus issue, with some starting to decline new business and a few applying COVID-19 exclusions.
Employment Practices Liability (EPL) markets have withdrawn from new hotel, restaurant, retail and leisure business, and analysts anticipate the EPL market to become more difficult, with higher rates and more exclusions expected if there is a recession.
One of the most heavily impacted areas of the market will be aviation, as 2020 premium income will be massively reduced as a result of aircrafts being grounded.
AmWINS believes this will only reinforce, and likely accelerate, the hard market conditions that have been seen over the last 18 months, although this will not be enough to outweigh the ultimate loss of income.
Contingency and event cancellation insurers are also seeing claims come in at an alarming rate, and while event cancellation coverage can still be obtained, it will now include a COVID-19 / Organic Pathogen exclusion.
“The COVID-19 pandemic has and will continue to make challenging market conditions even more difficult,” AmWINS concluded.
“While Lloyd’s remains open for business and a strong source of capacity for many industry segments, it’s important for retailers to prepare their clients for the challenges that lie ahead and begin marketing strategies early to account for changes in coverage and limits offered.”
