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Lloyd’s falls to H1 net loss; expects gross COVID-19 claims of $6.5bn

10th September 2020 - Author: Luke Gallin

The specialist Lloyd’s of London insurance and reinsurance marketplace has reported a loss of £0.4 billion (USD 0.5bn) in the first half of 2020, as COVID-19 related claims, after reinsurance recoveries, reached £2.4 billion (USD 3.1bn).

lloyd'sOn a gross basis, Lloyd’s says that it expects to pay out up to £5 billion (USD 6.5bn) in COVID-19 claims, of which £2 billion (USD 2.6bn), or roughly 40% is expected to be covered by reinsurance protection.

Back in May, the Lloyd’s market had said that it expects to pay customers between $3 billion and $4.3 billion in claims due to COVID-19, against an industry-wide loss of $107 billion in 2020.

The £2.4 billion of COVID-19 claims booked in H1 2020 has pushed the marketplace to a loss for the period, contributing 18.7% to the market’s combined ratio of 110.4%. This compares with a combined ratio of 98.8% in H1 2019, and excluding the pandemic, the H1 2020 combined ratio actually improved to 91.7%.

The £0.4 billion net loss compares with a profit of £2.9 billion (USD 3.8bn) for the first half of 2019. Excluding pandemic-related losses, and the Lloyd’s market would have recorded an underwriting profit of £1 billion (USD 1.3bn) in the period.

RMS

Gross written premiums (GWP) increased by 1.7%, year-on-year, to £20 billion (USD 26bn). However, Lloyd’s explains that once foreign exchange movements are removed, overall premium increased by just 0.1%.

The specialist re/insurance market also notes that positive rate momentum accelerated in the first half of the year, with the market achieving risk adjusted rate increases on renewal business of 8.7%. Although, this was offset by an 8.6% decline in business volume across the market, which Lloyd’s says reflects its focus on the quality of business it both renews and underwrites.

John Neal, Chief Executive Officer (CEO) of Lloyd’s, commented: “The first half of 2020 has been an exceptionally challenging period for our people, our customers, and for economies around the world. The pandemic has inflicted catastrophic societal and economic damage calling for unparalleled measures to stifle the spread of the virus, and to get businesses and economies back on their feet.

“Our half year results demonstrate that our robust approach to performance management and remediation has begun to take effect, evidenced by a significant turnaround in the underlying performance metrics, which give the truest indication of our market’s profitability.”

As Lloyd’s continues to address costs and administration expenses through its Future at Lloyd’s programme, the market’s expense ratio fell slightly in H1 2020, year-on-year, to 37.7%. Additionally, the market has reported a 7.1 percentage point improvement in the attritional loss ratio for the period, to 52.6%.

The market’s net resources increased by more than 7% in the period to £32.8 billion (USD 42.6bn), as Lloyd’s reports a first-half 2020 central solvency ratio of 250%, against 238% as at the end of December 2019.

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