Lloyd’s has revealed that it alone is due to pay claims of up to US$4.3 billion as a result of the Covid-19 pandemic – a payout figure on par with the 9/11 attacks.

The global projected losses of 2020 include around $107 billion from underwriting claims, with the rest from insurers’ investment portfolios ($96 billion), the firm explained. Claims related to cancelled events, business interruption and other costs have all been brought about by the Covid-19 pandemic. And, what’s more, Lloyd’s notes that the outbreak has threatened a global recession, which has put the payment of many household and business insurance premiums at risk.

Commenting on the likelihood of the global claims costs exceeding those of some of the most catastrophic hurricanes of recent years such as Hurricanes Katrina, Rita and Wilma in 2005 and Hurricanes Harvey, Irma and Maria in 2017, Lloyd’s warned: “Once the scale and complexity of the social and economic impact of Covid-19 are fully understood, the overall cost to the global insurance non-life industry is likely to be far in excess of those historical events.”

In a statement, Lloyd’s added: “Importantly, these natural catastrophes were geographically contained events, occurring over the course of hours and days – vastly different in nature to the global, systemic and longer-term impact of Covid-19.”

Lloyd’s CEO John Neal has since asserted that as talk of a second or third wave of the outbreak has been floated, it is integral that the insurance industry forms a new model for payouts.

He suggested that pandemic insurance coverage for a period of as much as two decades could be considered:  “An insurer would need to have a long-term cover to have confidence over time there would be some financial sense in providing the cover.”

In addition, Lloyd’s has launched support schemes to help businesses and society during this difficult time. “In addition to our £15 million [US$18.4 billion] package of charitable donations, we have set aside £15 million in seed capital to explore how the industry can create or house structures which support economic recovery and mitigate against future events of this magnitude,” Neal said. “We are also working with our advisory committees to develop a number of initiatives to support our customers and economic recovery in the short, medium and long-term.”

In response to Lloyd’s troubling figures, Christopher Croft, the CEO of London & International Insurance Brokers Association (LIIBA), warned against focusing solely on estimated loss figures such as those that Lloyd’s had published: “While it’s important to quantify the impact of Covid-19 on the market, the danger with industry numbers is that we focus too much on dissecting them at the macro level, talking about loss ratios and capital adjustments, and not enough on the experience of the individual businesses underlying them. We must not lose sight of the fact that this number is a culmination of clients in crisis. It’s not just about the money: our members are using all their skills and experience to help these businesses survive what are exceptionally challenging times. This is our chance to bring compensation and support into each business’s story.”