Lloyd’s of London to pay out £5bn on coronavirus insurance claims

Insurance market faces costliest event ever – more than 9/11 terror attacks and the disastrous hurricane season of 2017

Lloyd’s of London boss John Neal said the first half of this year has been ‘exceptionally challenging’ for insurers (AFP via Getty)

Lloyd’s of London expects to pay out £5bn in claims relating to the coronavirus pandemic, making it the costliest event in the insurance market's 334-year history.

Lloyd’s said on Thursday that the market lost £400m in the first half of the year, compared to a profit of £2.3bn in the same period last year.

The 90 members who make up the Lloyd’s market have faced additional claims for event cancellation, travel and business interruption policies.

While total payouts this year are expected to hit £5bn, Lloyd’s forecasts that insurers will be able to recover around £2bn of that through their own reinsurance.

Payouts will rise further if a court rules next week that more business interruption insurance should cover losses caused by Covid-19.

Many businesses believed their insurance covered them for costs caused by the lockdown but have not been able to claim.

The Financial Conduct Authority brought a case seeking clarification from a judge on whether insurers should have paid out on certain types of policies.

A ruling in the closely watched case is to be handed down on Tuesday, with many businesses’ survival hanging on the result.  

Lloyd’s chief executive John Neal said: “The first half of 2020 has been an exceptionally challenging period for our people, our customers, and for economies around the world.

“The pandemic has inflicted catastrophic societal and economic damage calling for unparalleled measures to stifle the spread of the virus, and to get businesses and economies back on their feet.”  

The Covid-19 crisis have been more expensive than three disastrous hurricanes in 2017, which cost Lloyd's $4.8bn (£3.7bn), and the 9/11 attacks in New York, after which Lloyd’s paid out $4.7bn.

Excluding the pandemic, Lloyd’s would have delivered an underwriting profit of £1bn, it said.