Insurance firms could potentially face their largest ever losses in 2020 following the effects of the global pandemic.
Speaking to the Financial Times, Lloyd’s of London chief, John Neal, said that the coronavirus pandemic could potentially be the “most expensive event in history”.
He warned that it would have a more devastating effect on the industry than other major disasters such as the 9/11 terror attacks or Hurricane Katrina, which had a $50bn (£40.5bn) payout figure.
Neal told the newspaper that the pandemic was “no doubt the largest insurance challenge the industry has ever faced, I think by some way”.
He said: “You’re into tens of billions, if not hundreds of billions of loss that will be discussed over time. The chances of the market making anything other than a notable loss in 2020 are zero.”
In the wake of the virus, insurance firms are set to pay out on a wide range of policies, including event cancellation and management liability.
Insurers are also likely to have to refund some premiums due to the general downturn in business. Neal warned that hundreds of millions of pounds of premiums could be returned by insurers due to many policies adjusting economically, based on turnover, wage roll or utilisation.
Neal’s warning comes as Lloyd’s has set aside £15m to fund research into how pandemics and other big events can be better dealt with in future.
Speaking to the Financial Times, he also urged insurers to “get mechanisms in place quickly” for business interruption schemes so that “if there is a dispute it doesn’t go for months if not longer”.
He also told insurers they must come to an agreement with the government about how a second wave of coronavirus could be covered. “We’ve got weeks, not months to resolve some of these immediate issues.”