More price increases will be needed to offset Covid-19 losses absorbed by the Lloyd’s market to date, according to analysis by Insurance DataLab.
The analysis found Lloyd’s annual result had worsened by £1.6bn ($2.2bn) in 2020 after a £400mn underwriting loss in 2019.
These losses have been driven by worsening underwriting performance in the pecuniary loss market – a category that protects against financial loss, and which includes products such as business interruption (BI) – with the business line falling to a £656.5mn underwriting loss for 2020.
This compares to an underwriting profit of £96.7mn for 2019.
In its annual results released in March, Lloyd’s reported its fourth consecutive annual underwriting loss with the market posting a combined ratio of 110.3 percent for 2020.
Covid-19 contributed 13.3 percentage points to the 2020 combined ratio, with the market producing an underlying combined ratio of ~97 percent for the full year.
Insurance DataLab said only two business lines achieved underwriting profits for 2020, with the motor class reporting a profit of more than £42.2mn (2019: £8.6mn), driven by the drop-off in driving and associated claims during the pandemic.
In addition, marine, aviation and transport business reported underwriting profits of £203.8mn, up from an underwriting loss of £48.6mn in 2019.
The overall market loss also coincided with a drop in gross written premiums (GWP) in the sector, the analysts said.
GWP across the pecuniary loss market fell by more than a quarter to £530.2mn over 2020, compared to £739.1mn in 2019 and £946.3mn for 2018 (see chart).
Insurance DataLab co-founder Matt Scott said the Lloyd’s market has been hit hard by the Covid-19 pandemic, with BI and other pecuniary loss claims “more than quadrupling” over the last 12 months.
“The sector has already pushed through price increases, particularly towards the end of 2020, but more will be needed to offset the losses already experienced by the market to date,” he said.
“Financial pressures will continue to affect businesses as the world’s economies continue to emerge from the pandemic, and insurers must brace themselves for further failures among its customer base, which will only add further downward pressure on an already shrinking premium base.”
Lloyd’s upped its gross estimate for full-year 2020 Covid-19 losses by £1bn in March to approximately £6bn. The market had predicted last summer a $5bn loss as a result of claims linked to the pandemic in 2020, with approximately £2bn to be passed to reinsurers.