Lloyd’s has forecast it will pay out up to £3.5bn for coronavirus-related claims this year and warned that losses could rise even further if the current lockdown continues into another quarter. The claims relate to event cancellation (31%), property covers (29%), credit lines (11%) and 15 other classes (29%).

Lloyd’s said the total projected loss to the entire insurance industry, based on an economic study of potential underwriting and investment losses could be as much as £166bn. This is made up of estimated 2020 underwriting losses of approximately £87.5bn and a fall in investment portfolios of £78.5bn.

John Neal, CEO of Lloyd’s, commented: “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 £3.5bn making it one of the market’s largest pay-outs ever. What makes COVID-19 unique is 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.”

Neal added that Lloyd’s had set-aside £15m in seed capital to explore how the industry can create or house structures which support economic recovery and mitigate against future events of this magnitude.

Neal also confirmed that it is also looking into a ‘Recover Re’ insurance vehicle offering after the event cover for pandemic related business recovery, including the current COVID-19 pandemic.

Responding to the claims forecast, Christopher Croft, CEO of broker representative body LIIBA, warned the industry should not over focus on the figures: "We must not lose sight of the fact that this number is a culmination of clients in crisis. It's not just about the money: our members are using all their skills and experience to help these businesses survive what are exceptionally challenging times. This is our chance to bring compensation and support into each business's story."

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