Analysts at insight and consultancy firm Insurance DataLab have stressed that, despite substantial rate increases over recent months, further price rises will be needed to offset losses within the Lloyd’s market.
Lloyd’s premiums have increased by more than 50% year-on-year in every quarter since the start of the pandemic, the firm noted, but it warned that financial pressures will continue to affect businesses as the world’s economies continue to emerge from the pandemic.
The Covid-19 pandemic has driven the Lloyd’s market to underwriting losses of more than £2 billion for 2020, which was more than £1.6 billion worse than the £0.4 billion underwriting loss reported for 2019.
These losses have been driven by a worsening of underwriting performance in the pecuniary loss market in particular, with the business line falling to a £656.5 million underwriting loss for 2020, according to Insurance DataLab.
GWP across the pecuniary loss market also fell by more than a quarter to £530.2 million over 2020, compared to £739.1 million in 2019 and £946.3 million for 2018, with business interruption and other pecuniary loss claims more than quadrupling over the last 12 months.
The tough market conditions have also led to a hike in FinPro premiums, with year-on-year price increases in the UK market peaking at 90% in the fourth quarter of 2020 according to the Marsh Global Insurance Market Index.
“Insurers must brace themselves for further failures among its customer base, which will only add further downward pressure on an already shrinking premium base,” Insurance DataLab warned.
Across the whole of the Lloyd’s market only two business lines achieved underwriting profits for 2020, with motor business reporting a profit of more than £42.2 million for 2020, aided by the reduction of driving miles during the pandemic.