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Law360, London (September 10, 2020, 11:23 AM BST) -- Lloyd's of London said on Thursday that it faces a £2.4 billion ($3.1 billion) hit from claims over COVID-19, pushing the specialist insurance market into a loss for the first six months of the year.
Lloyd's reported a £400 million market loss for the first half, down from a profit of £2.3 billion in the same period last year.
"The first half of 2020 has been an exceptionally challenging period for our people, our customers, and for economies around the world," John Neal, Lloyd's chief executive, said. "The pandemic has inflicted catastrophic societal and economic damage calling for unparalleled measures to stifle the spread of the virus, and to get businesses and economies back on their feet."
Lloyd's said it would pay out up to £5 billion in claims connected to COVID-19, up from early estimates of $4.3 billion in May. But it said that £2 billion of the £5 billion would be borne by reinsurance.
The corporation said its combined ratio was 110.4%, up from 98.8% in the first half of 2019. A combined ratio is a measure of underwriting profitability, with any number above 100% indicating a loss.
But the corporation said that its combined ratio without COVID-19 claims was 91.7% — which it said showed a "substantial improvement" on 2019.
It attributed the underlying profit growth to its performance management initiative, which has led several syndicates to exit the market after years of sustained losses.
"Our half-year results demonstrate that our robust approach to performance management and remediation has begun to take effect, evidenced by a significant turnaround in the underlying performance metrics, which give the truest indication of our market's profitability," Neal said.
Lloyd's said its solvency ratio stood at 200% by Aug. 26, well above the regulatory minimum of 100% under the Solvency II Directive. Nevertheless, the ratios were still below the 238% it had at the end of 2019.
--Editing by Ed Harris.
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