Market to establish ‘Recover Re’ insurance vehicle offering “after the event” cover for pandemic related business recovery
Lloyd’s has revealed that it will pay out in the range of $3 billion to $4.3 billion to its global customers as a result of the far-reaching impacts of COVID-19. 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 pay outs by the market. These losses could rise further if the current lockdown continues into another quarter.
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 estimated 2020 underwriting losses covered by the entire industry as a result of COVID-19 are approximately $107bn, according to Lloyd’s economic study. This is on par with some of the biggest major claims years for the industry, such as when three catastrophic windstorms have struck (2005: hurricanes Katrina, Rita and Wilma; 2017: hurricanes Harvey, Irma and Maria).
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.
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.
John Neal, CEO of Lloyd’s, said: “The global insurance industry is paying out on a very wide range of policies to support businesses and people affected by COVID-19. The Lloyd’s market alone is currently expected to pay claims amounting to some $4.3 billion, making it one of the market’s largest pay-outs ever.
”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 plans to announce a series of further initiatives in the coming weeks as it continues to work with government, industry and business to support the short, medium and long-term response to COVID-19. One initiative under consideration includes establishing a ‘Recover Re’ insurance vehicle offering “after the event” cover for pandemic related business recovery, including the current COVID-19 pandemic.