Lloyd’s insurers face COVID-19 related claims from approximately 14 categories of insurance, said Chief Executive Officer John Neal during a media call to discuss the market’s 2019 results.
Neal said it is too early for the market to assess the likely quantum of insurance losses from COVID-19, but a whole range of classes of business would be affected. He emphasized that Lloyd’s is treating the COVID-19 crisis as it would any other form of catastrophic loss.
In the main, Lloyd’s expected losses will arise from lines such as event cancellation insurance, travel insurance, medical malpractice, workers’ compensation and employers liability from groups such as health care workers and airline flight attendants, Neal said.
Neal confirmed that other areas of exposure include potential lawsuits from general liability claims against cruise companies and hotels, for example. And then there are the economic losses affecting directors and officers, trade credit, political risk, surety and mortgage.
He said the market’s immediate concerns were on the effects of the economic crisis on the balance sheet, rather than on the P&L from underwriting.
Lloyd’s central solvency ratio was 205% on March 19, dropping from 238% in 2019, while the market-wide solvency ratio (covering individual syndicates with their own reserves) dropped to 146% from 156% last year, which is still robust according to Solvency II standards that require a ratio above 100%.
During the Q&A, Neal noted that event cancellation insurance is the easiest line “to get your arms around,” which will include the Olympics, Wimbledon and the Glastonbury music festival in the UK.
“We are an insurer of event cancellation but not as big as the Munich Re’s and Swiss Re’s of this world. It’s not our over-arching issue.”
Swiss Re announced recently that it has an estimated overall market share of approximately 15% to event management and cancellation covers that could be claimed due to COVID-19. Before the Tokyo Olympics were postponed, John Dacey, group chief financial officer, said, Swiss Re has a specific exposure of $250 million to the Games. With postponement, analysts agree, the insurance exposure is less than it would have been if the event were canceled.
Dacey went on to say that the company has an exposure somewhere in the middle between $100 million and $999 million for other events scheduled over the rest of the year, split between its Corporate Solutions and P&C Reinsurance units for other events scheduled over the rest of the calendar year.
Munich Re has not yet released any numbers connected to COVID-19, although it said in a recent statement that the group’s economic position remains strong even in the current circumstances. “Even in the very unlikely scenario of a worldwide pandemic equivalent to a 200-year event, insurance claims are expected to be similar in scope to a medium-sized natural catastrophe in property-casualty reinsurance.”
Neal said the market would communicate its market losses in early May, having learned the lesson of the 9/11 terrorist attacks when losses were released too soon and had to be adjusted. “It’s tempting to rush out with a figure but there’s nothing worse than rushing out with the wrong figures. So, let’s make sure we get the numbers right before we go forward.”