The specialist Lloyd’s of London insurance and reinsurance marketplace has reported a net loss of £900 million for 2020 against profit of £2.5 billion a year earlier, as net incurred COVID-19 losses, net of reinsurance, reached a significant £3.4 billion.
On a gross basis, customer payouts related to the pandemic are estimated at £6.2 billion, of which Lloyd’s says some £2.6 billion are reinsured.
During 2020, COVID-19 contributed 13.3% to the Lloyd’s market’s combined ratio of 110.3%, which marks a deterioration from the 102.1% reported in 2019.
Overall, major claims for Lloyd’s in 2020 totalled just under £6 billion, of which almost 60% is attributable to COVID-19, with the remainder mostly due to losses from catastrophe events in the year.
The largest catastrophe losses related to Hurricanes Laura, Sally, Zeta, Delta, and Isaias; the Iowa derecho; the tornadoes in Tennessee; the explosion in the Port of Beirut; and the worldwide protests against racial injustice.
All in all, Lloyd’s has reported an underwriting loss of £2.7 billion for 2020, driven mostly by the impacts of the ongoing pandemic.
Excluding COVID-19 related losses, and Lloyd’s reports that its underwriting performance actually improved year-on-year with profit of £800 million and a combined ratio of 97%, compared with 102.1% in 2019.
John Neal, Lloyd’s Chief Executive Officer (CEO), commented: “Following an extremely challenging year marked by a global health crisis of a scale never seen before, Lloyd’s continued to support its customers with pay outs expected to total £6.2bn in COVID19 claims. The year was also marked by a high frequency of natural catastrophe claims and the UK’s formal exit from the EU, driving further losses and uncertainty.
“Against this unprecedented backdrop we have made good progress across our performance, digitalisation, and culture transformation plans. Our disciplined underwriting approach and determination to become the world’s most advanced insurance marketplace have set us up for real success this year alongside the continued positive rate momentum that will see the market supporting growth for the first time in four years.”
Looking at premiums, and the market has announced gross written premium (GWP) of £35.5 billion for 2020, which is down slightly on the £35.9 billion reported a year earlier.
During the key January 1st, 2021 reinsurance renewals, Lloyd’s recorded an overall price change on renewal business of roughly 10.8%, which is an improvement on the previous year.
But despite the improved and positive pricing momentum, the market experienced volume declines in 2020 as some syndicates exited lines. As a result of these declines, Lloyd’s has reported an overall decrease in premium of 1.2% when compared with 2019.
The market’s expense ratio remains a key area of focus and during 2020, improved by 1.5% to 37.2%. The attritional loss ratio also declined, year-on-year, to 51.9%.
Net investment income for 2020, at £2.3 billion (2.9% return), declined from the £3.5 billion (4.8% return) announced in 2019. Lloyd’s notes that despite the challenges of the first-quarter and investment losses, 2020 was an overall positive year for investments.
Lastly, the market’s net resources jumped by almost 11% to £33.9 billion as at December 30th, 2020, reinforcing the exceptional strength of its balance sheet with a central solvency ratio of 209%.