Lloyds of London, the worlds biggest insurance market, expects to pay out between $3bn (£2.4bn) and $4.3bn (£3.5bn) to its customers due to the coronavirus pandemic, as it warned of a $203bn hit for the entire industry.
Insurance companies around the world have suffered losses as widespread government shutdowns have prompted claims for business closures, and halted travel and events.
The scale of payouts to customers forecast by Lloyds this year are equivalent to other big claims years for insurers, such as the aftermath of 9/11, when Lloyds paid out $4.7bn, and in 2017, when hurricanes Harvey, Irma and Maria caused widespread damage and loss, leading to $4.8bn in payouts.
The insurance market estimates the industry will face underwriting losses this year of approximately $107bn due to Covid-19. In addition, insurers have seen a slump in the value of their investments which they use to pay claims, of about $96bn, creating a total loss for the industry of over $200bn.
The Lloyds of London chief executive, John Neal, said the pandemic was an unparalleled event. “What makes Covid-19 unique is the 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 does not expect the underwriting floor at the firms headquarters to reopen before August.
Bars, restaurants and nightclubs in the UK and other small businesses are pursuing legal action against the insurer Hiscox for non-payment of business interruption insurance after they were forced to close by the government shutdown.
Lloyds is considering an initiative called “recover re” insurance, a reinsurance scheme that would offer cover “after the event” for businesses, to enable them to get back on their feet after a pandemic, including Covid-19.