Lloyd’s to increase COVID-19 loss forecast to £6bn
Posted 25/03/2021 – Quick takes
It has been reported that John Neal, CEO of Lloyd’s, at an OECD conference yesterday advised that the COVID-19 related claims for the Lloyd’s market will be almost £6bn, when the 2020 Annual Results are reported next Wednesday (31st March).
This is higher than the £5bn forecast in the half year figures last year. As a reminder, this was the forecast for all the Lloyd’s COVID-19 related gross claims, prior to any reinsurance recoveries. The net equivalent claims at the time (after reinsurance recoveries) was in the range £2.5bn – £3.5bn. The net loss, based on the now increased claims level of £6bn, was not mentioned.
It is not surprising that the COVID-19 loss forecast has increased the last six months, as the periods of lockdown, both in the UK and around the world, have been far more protracted than were expected. The ruling on the FCA test case in the UK Supreme Court earlier this year will have contributed to some of the increased gross loss reserve. Whilst many of the major sporting events last year, including the Tokyo Olympics, were postponed to 2021 and are now going ahead, even if without a live audience, many smaller events have been cancelled altogether which will have exacerbated the quantum of the loss. Several syndicates’ forecasts for the 2019 year of account, where much of the COVID-19 attaches, are showing deterioration as at 31st December 2020 due to increased COVID-19 reserves (as well as Q4 US windstorm losses). Happily, the Alpha portfolio tends not support the majority of syndicates which are forecasting increased losses and is showing a small improvement this quarter. Alpha members are now forecast to make an average reduced loss of -1.4% for 2019, despite a slightly increased COVID-19 loss reserve. We will be issuing members’ individual updated forecasts once we receive the full set of figures after the Lloyd’s results are published next week.