Lloyd’s has released its estimated exposure to claims related to the ongoing Covid-19 pandemic. It has carried out two surveys of managing agents to establish their expected losses based on a series of scenarios, the most extreme of which include lockdown provisions remaining in place throughout the third quarter of this year.

It has also conducted internal studies to derive impacts for the entire insurance industry. Lloyd’s view is that it will bear a smaller than market average share of the total estimated insurance loss as it has smaller than market average exposure to SME business and also to trade credit insurance.

Lloyd’s estimates its insurance loss (i.e. payments to claimants) in a range between £2.5 billion and £3.5 billion ($3.0 billion and $4.3 billion). Most important of their assumptions is that where business interruption cover is excluded in the absence of physical loss to insured premises, there will be no retrospective provision of cover. There are still around 10% of property insurance contracts that do give at least some element of pandemic or disease coverage and it is expected that, where appropriate, these policies will respond to claims.

It emphasises that there remains a large degree of uncertainty and the estimates rely on judgement. For example, insurance exposures will change with the global economy entering recession, but for example, there will be lower claims activity in motor insurance as there are fewer vehicles on the road. Lloyd’s figures do include some losses which are likely to occur, but have not happened yet such as cancellation and abandonment of events scheduled this year and next.

Lloyd’s Covid-19  losses by class of business



Gross £m

Net £m

% Net

A&H Contingency




Property Direct




Property Reinsurance




Political risk, credit, financial guarantee




Other classes








In terms of geography, this is a truly global loss and Lloyd’s is anticipating loss activity from all of its major markets, broadly in line with the underlying split of business. The largest losses are forecast from the largest market, the USA with 40%, followed by the UK (15%) and the rest of Europe (7%).

Argenta comment

We believe that Lloyd’s has been conservative in these forecasts. Although there remains a great deal of uncertainty as to the final outcome, Lloyd’s estimate of the total insured loss of $107 billion  at the higher end of estimates that we have seen. Reinsurance broker Willis Re was yesterday quoted as saying that “owned-up” exposures according to published statements by insurers and reinsurers amount to only $4 billion to date. Lloyd’s figures now account for half of the reported loss. We would hope that the thorough analysis Lloyd’s has given to assessing its exposures means that these forecasts will stand the test of time as the loss develops.

Coupled with the insurance loss, insurers have also experienced severe loss to the value of balance sheet assets. Lloyd’s estimates that the loss to global insurers’ asset base could be of a similar magnitude. It suggests the combined loss for insurers and reinsurers could be $200 billion. Although there will undoubtedly be some headwinds associated with a rapid deceleration of economic activity globally, John Neal commented that the loss of $200 billion of insurance capital was sure to lead to a hard market.

Lloyd’s will not be releasing syndicate by syndicate exposures and it has not split the loss across underwriting years of account. From an annual accounting perspective, all of the loss will feature in the 2020 GAAP accounts, but for underwriting members of Lloyd’s, the loss will be spread across the 2018, 2019 and 2020 underwriting years.

From the data that we have seen so far, and also from our conversations with supported syndicates, the majority of the exposures falls to the 2019 year of account. Syndicates will be releasing initial forecasts for 2019 by the end of this month. We were hoping for a strong return to profitability for our members; although we remain optimistic that the year will still deliver a small overall surplus, it will not be the robust profit we had hoped for.

This is borne out in the forecasts that we have received to date. Both Atrium Syndicate 609 (0% to +10%) and Apollo Syndicate 1969 (+2.5% to +12.5%) are forecasting a profit at the bottom of the range of outcomes while Hiscox 33 (-7.5% to +2.5%), MAP 2791 (-5% to +5%) and Meacock 727 (-9% to +11%) currently have forecasts that straddle profitable and loss making outcomes. We would characterise this latter group of three as conservative when releasing early forecasts.

At this stage there are no forecasts for the 2020 year of account and the US wind season is still to start. Underwriters continue to tell us that rate improvements for the year to date are ahead of plan and have accelerated following the move to remote working.

We will provide further analysis in the coming days and also when we have the complete schedule of forecasts.