Lloyd’s of London expects its claims due to the coronavirus pandemic to be between $3-$4.3bn, the highest payout since the 9/11 attacks.
The pandemic has hit almost all business sectors and now the insurance industry says it will feel the pain. Lloyd’s expects a third of its claims to come from the cancelation of major events including the 2020 Tokyo Olympics that have now been moved to 2021. Property insurance and business interruption claims are also expected to surge.
The losses could increase further if the lockdown measures continue into the third quarter of the year. For Lloyd’s, the payouts due to the pandemic would be equivalent to the claims arising from three hurricanes Harvey, Irma, and Maria in 2017.
“It could be two years before everyone really gets their arms around the true cost of this pandemic,” Lloyd’s chief executive John Neal told the BBC. “We estimate that government borrowing could be as much as $10trn globally to protect the economy for the losses that we’ve seen.”
Neal added: “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.”
However, several small businesses in the UK find that their policies do not cover the pandemic. For instance, Hiscox, one of Lloyd’s of London insurer has categorically said that it wouldn’t pay business interruption claims that arise due to the pandemic.
Lloyd’s said that once all factors were taken into account, the total impact of coronavirus on the insurance industry as a whole was likely to be far bigger.
“The estimated 2020 underwriting losses covered by the industry as a result of Covid-19 are approximately $107bn,” it said.
“In addition, unlike other events, the industry will also experience falls in investment portfolios of an estimated $96bn, bringing the total projected loss to the insurance industry to $203bn.”