Law360, London (May 14, 2020, 10:22 AM BST) -- Lloyd's of London said on Thursday that its members will pay out up to $4.3 billion in insurance claims resulting from COVID-19, a total that could increase if the government-ordered lockdown extends into the next quarter.
The specialist insurance market expects claims from global customers to be as high as $4.3 billion this year amid the coronavirus outbreak. (AP)
"Lloyd's believes that, once the scale and complexity of the social and economic impact of COVID-19 is fully understood, the overall cost to the global insurance non-life industry is likely to be far in excess of those historical events," the insurance market said in a statement.
The estimated underwriting losses faced by insurers in the global market is likely to balloon to $107 billion, Lloyd's said — a similar hit to 2005, when the industry was rocked by hurricanes Katrina, Rita and Wilma. The global number is far higher than even the gloomiest $60 billion estimate from investment bank UBS last month.
The underwriting loss is compounded by an additional loss of global investment of $96 billion, a consequence of volatility in financial markets, bringing to $203 billion the total estimated blow to the industry.
Lloyd's said the number could yet be revised upward, depending on the severity of the pandemic.
"Importantly, these natural catastrophes were geographically contained events, occurring over the course of hours and days – vastly different in nature to the global, systemic and longer-term impact of COVID-19," Lloyd's said in its statement.
John Neal, chief executive of Lloyd's, said the market was working with the government to formulate a "short, medium and long-term response" to the crisis.
An industry steering group has been established under state-backed terrorism reinsurer Pool Re, which could establish a similar reinsurance vehicle to cover business losses from COVID-19.
Neal confirmed Thursday that the project, now named Recover Re, will offer cover to companies for business recovery, including during the pandemic.
The insurance industry is under increasing pressure to pay business interruption claims, and group litigation is being planned by hundreds of small business against Hiscox and other insurers.
--Editing by Ed Harris.
For a reprint of this article, please contact email@example.com.