The specialist Lloyd’s of London insurance and reinsurance marketplace is considering the creation of a new insurance vehicle called ‘Recover Re’, designed to provide “after the event” cover for pandemic related business recovery, including the ongoing Covid-19 crisis.
Lloyd’s recently announced that it will pay customers up to $4.3 billion in claims due to Covid-19, and estimated that for the industry as a whole, non-life losses in 2020 alone will reach a huge $107 billion.
The insurance and reinsurance industry loss estimate for the year is massive and positions the ongoing pandemic as the largest single market loss in history. However, the $107 billion forecast only includes non-life underwriting losses experienced in 2020, so the total could rise considerably.
In its announcement, Lloyd’s has said that it plans to reveal numerous initiatives in the coming weeks to support the short, medium, and long-term response to the pandemic.
“One initiative under consideration includes establishing a ‘Recover Re’ insurance vehicle offering “after the event” cover for pandemic related business recovery, including the current COVID-19 pandemic,” said Lloyd’s.
For a number of reasons, most notably price, the large majority of businesses have been reluctant to purchase standalone pandemic insurance or even pandemic-related extensions to standard business interruption policies, which require a physical trigger element, such as a fire, and largely explicitly exclude outbreaks of infectious diseases.
Of course, companies of all shapes and sizes, from all types of industries, have been financially impacted by varying degrees from the current crisis, but without adequate and effective protection, recovery is much more challenging.
As Lloyd’s continues to work with government, industry and business to support the response to Covid-19, the potential development of a ‘Recover Re’ insurance vehicle is just one of the initiatives under consideration.
As well as managing wide-ranging pay outs across sectors and geographies, market participants have already started creating new policies to support the immediate health response, and also the longer-term exit strategy.
“This includes the search for diagnostics, treatments and vaccinations, where one Lloyd’s syndicate^ is insuring more than 100 individual clinical trials taking place around the world investigating all stages of COVID-19,” Lloyd’s explained.
In addition, and alongside the marketplace’s £15 million support package for charitable organisations responding to Covid-19, Lloyd’s has revealed that it is also repurposing existing innovation initiatives in its Innovation Lab and Product Innovation Facility to help fast track the development of the new solutions.
John Neal, Chief Executive Officer (CEO) of Lloyd’s, commented: “Alongside making record pay outs, we have been turning our attention to what more we can do to support business and society through this incredibly difficult time. In addition to our £15m package of charitable donations, we have set aside £15m in seed capital to explore how the industry can create or house structures which support economic recovery and mitigate against future events of this magnitude.
“We are also working with our Advisory Committees to develop a number of initiatives to support our customers and economic recovery in the short, medium and long-term.”