Lloyd’s of London boss expects claims spike as market enacts coronavirus response plan
The chief executive of insurance market Lloyd’s of London said today he expected a spike in claims as a result of the coraonvirus pandemic.
Speaking to City PM, John Neal said “I think we will have heightened claims activity,” but said it was not yet possible to predict the full impact.
Neal said Lloyd’s has “activated our normal response to any form of catastrophic loss”.
This includes the daily monitoring of losses as they are reported.
Neal said Lloyd’s had contacted the around 100 insurers that trade in the market and is “going through the process of understanding what they think their exposures might be”.
Despite widespread concern that insurers would not cover losses triggered by the pandemic, Neal said he had counted 14 different types of insurance that are likely to be called upon by policyholders.
These include event cancellation, travel, medical malpractice, employers’ liability, lawsuits, product liability claims and trade credit cover.
He said some of the losses, such as event cancellation, would be easy to anticipate.
“Look out three months and assume everything will be cancelled and you can measure your loss,” he said.
Neal said claims based on the economic impact of the pandemic could be more complicated.
“Our sense is we could be feeling the claims loss for a year or two, it will take quite a bit of time to settle down,” he said.
Neal said Lloyd’s, which announced a pre-tax profit of £2.5bn for 2019 today, was well-placed to cope with the crisis.
“I’m keen to represent that the balance sheet is in really good state…so we can leave everyone happy and we can fulfil our obligations to pay claims to our policyholders.”
Lloyd’s said today that its net resources increased 8.6 per cent to £30.6bn, “reflecting an exceptionally strong balance sheet”.
Digital future
Neal said Lloyd’s push to grow electronic trading had been vindicated by the crisis and said its digital infrastructure had coped well with the transition.
“The current crisis shows we are right to spend our time and energy fast-tracking digitalisation,” he said.
He also said that the current shift to remote working was likely to have a dramatic impact on how people and companies operate in the future.
“If people are away from the office for eight-to-12 weeks, this could change the way of working forever and we are going to have to adapt to suit,” he said.
Neal said Lloyd’s online working systems had coped well so far with the extra strain.
“Operationally it has gone remarkably well, that is a pleasant surprise, our infrastructure has held up well and the third-party infrastructure has held up really well, whether that’s Zoom, Microsoft Teams or Bluejeans,” he said.
He also said that it was likely the way insurers and customers protected themselves against pandemic risks was likely to change as a result of the current crisis.
“As an industry we will be looking to talk to our customers and find out what we can do to help them should it recur or to offer protection against future pandemics,” he said.
Neal also noted that although pandemic insurance offerings existed, up until now the uptake had been low.
“Post-ebola in 2014 Munich Re and Marsh introduced a pandemic product called Pathogen RX – and no one bought it…even post-ebola no one saw pandemic as a risk they would directly insure against,” he said.