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Lloyd’s of London Chief Executive John Neal said Thursday it was too early to estimate the impact of COVID-19 losses on the market, but that there was no undue concern around solvency as the market reported a return to profit for 2019.
Lloyd’s pre-tax profit of £2.5 billion ($3 billion) for 2019 was a turnaround from a loss of £1.0 billion in 2018, bolstered by strong investment returns and as its sharpened focus on underwriting performance paid off.
“After two very challenging years in 2017 and 2018, it’s good to be reporting a return to profitability for the Lloyd’s market,” Mr. Neal said Thursday during an online trade briefing on Lloyd’s 2019 annual results.
In 2019 Lloyd’s reduced its exposure and increased prices, Mr. Neal said.
“In real terms, premium volume reduced by 8% for the market and rates were up 5.4% as our performance improvement plan started to have the desired effect,” he said.
Lloyd’s combined ratio improved by 2.4 percentage points to 102.1% in 2019, from 104.5% in 2018, but it said it will take three years to see the full effect of its underwriting performance plan.
Insurance losses from COVID-19 will arise mainly from business interruption, credit type insurance, event cancellation, and travel lines of business, Mr. Neal said during the briefing.
“We’ve assessed as many as a dozen different insurance policies that we issued that will be responding to COVID-19 claims,” he said.
Questions around business interruption insurance will take some time to sort out, he said.
Lloyd’s will provide its first estimate of the COVID-19 impact on the market in early May.
As of March 19, Lloyd’s solvency ratio stood at 205%, a decline from 238% on Dec. 31, 2019. “As we move into this crisis, our balance sheet is in really good shape,” Mr. Neal said.
Lloyd’s saw rates for the market increase by 5.4% in 2019, which exceeded its plan, and the upward trend has continued in 2020, Lloyd’s CFO Burkhard Keese said during the call.
“We have now had nine consecutive quarters of rate improvements. … Rate has improved in 53 out of 61 classes of business. Poor performing classes, including aviation, energy, marine and property, achieved the highest rate increases — at least 2 percentage points better than planned,” he said.
Rate improvements were seen across all geographies, with the largest increases in Australia and Canada, “but also in the U.S. we have seen positive rate change coming from all property classes of business,” Mr. Keese said.
Due to the economic crisis arising from COVID-19 Lloyd’s has reined back its second-quarter activities and spending related to its Future of Lloyd’s plan, Mr. Neal said.
“The events of the past few weeks show the overarching importance of our ability to trade and connect in a different world and the need to create a different working environment for our people,” Mr. Neal said.
More insurance and risk management news on the coronavirus crisis here.