Thursday May 14, 2020
LONDON: Coronavirus will cost the global insurance industry about $203 billion (188 billion euros), Lloyd's of London insurance market forecast on Thursday.
Lloyd's itself expects to pay out up to $4.3 billion on coronavirus claims, putting the cost on a similar magnitude to the September 11, 2001 terror attacks.
Lloyd's said it had examined underwriting losses and reductions in the value of investments that companies hold to fund future claim payments.
"The estimated 2020 underwriting losses covered by the industry as a result of COVID-19 are approximately $107 billion, on par with some of the biggest major claims years for the industry," it said after carrying out an economic study into potential losses in the non-life insurance sector.
"In addition, unlike other events, the industry will also experience falls in investment portfolios of an estimated $96 billion, bringing the total projected loss to the insurance industry to $203 billion," added Lloyd's, which insures against catastrophes such as earthquakes, shipwrecks and revolutions.
The sector-wide review looked at payout estimates, based on continuing social distancing and lockdown measures for the rest of 2020, and forecasts of plunging global economic activity.
The pandemic has killed almost 300,000 people and infected more than four million worldwide.
"Lloyd's... today revealed that it will pay out in the range of $3.0 billion to $4.3 billion to its global customers as a result of the far-reaching impacts of COVID-19," it added in a statement.
"This is on a par with 9/11 in 2001 and the combined impact of hurricanes Harvey, Irma and Maria in 2017, all of which led to similar payouts by the Lloyd's market.
"These losses could rise further if the current lockdown continues into another quarter."
Meanwhile, "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", it added.
The market paid out $4.7 billion for claims arising from the 9/11 terror attacks, while combined payouts for hurricanes Harvey, Irma and Maria stood at $4.8 billion in 2017, it noted.
Lloyd's of London chief executive John Neal said COVID-19 would have a "unique" impact on the sector owing to its "devastating" economic, human and social cost.
"The global insurance industry is paying out on a very wide range of policies to support businesses and people affected by COVID-19," Neal said.
He added: "What makes COVID-19 unique is the not just the devastating continuing human and social impact, but also the economic shock.
"Taking all those factors together will challenge the industry as never before, but we will keep focused on supporting our customers and continuing to pay claims over the weeks and months ahead."
Lloyd's, whose colourful history dates back to the late seventeenth century, is situated in the heart of London's City finance district.