"Wholesale insurance has always embodied Dickensian paradox. For brokers and underwriters, the worst disaster would be a world without disasters. Covid-19 should reset prices and speed modernisation of the London market more radically than any crisis so far this century.
Insurance capacity would shrink by 10 per cent in an extended downturn, Ming Zhu of Panmure Gordon estimates. Some weaker insurers will collapse or be absorbed. Lloyd’s is not badly exposed as a whole — expected claims are below its 5-10 per cent world market share. But a few syndicates are bound to struggle with steep losses."
LEX in FT 15th May, 2020
The challenge for chief executive John Neal is to discourage backsliding as members return to Lime Street to deal with their $4.3bn hit. As for stopping lunchtime drinking, that victory may only last as long as local pubs remain shut.
It is the worst of times for the insurance industry. Across the world, clients are furious at non-payment of business interruption claims triggered by the pandemic. Undisputed claims will still cost insurers some $107bn, estimates Lloyd’s of London, with members covering $4.3bn of the bill. That equates with destructive hurricane seasons in 2005 and 2017. Investment losses may double the impact, delivering the worst blow to insurers on record. It is also the best of times for the insurance industry. Big payouts under policies covering event cancellations and directors’ liabilities will demonstrate the utility of the product. The cost of cover will rise — as will future profitability — reflecting higher claims, brisk demand and lower inflows of foreign investment. This will ultimately be good for well-capitalised insurers.