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Law360, London (March 24, 2020, 1:38 PM GMT) -- The volume of insurance deals between brokers and underwriters traditionally done face-to-face in London could be "significantly disrupted" by the coronavirus pandemic, a ratings agency said on Tuesday.
Fitch Ratings downgraded from stable to negative the outlook for the specialist London insurance market, most of whose work is done through Lloyd's of London.
The unwelcome news follows the closure last Thursday of the Lloyd's of London underwriting room, which takes up four floors of the market's offices at its landmark 1 Lime Street base and is used by around 5,000 people a day.
"Business transacted in the London market typically relies heavily on face-to-face interaction, and this could be significantly disrupted if the COVID-19 outbreak is prolonged," the ratings agency said.
Fitch also said the corporation's 2020 modernization program, which involves making it easier for new syndicates to be established, could be disrupted. And measures to attract insurance-linked securities to the market could also be unsettled.
"The rapid spread of COVID-19 could increase operational risks for the implementation of the Future at Lloyd's project, which aims to modernize the market and make it more cost efficient," Fitch added.
Another of the key areas in the modernization plan is the goal of replacing paper-based contracts with online trading.
Traditionally, all business has been done through paper-based slips, where all manner of valuable property is insured, from luxury yachts to singer Tom Jones' chest hair ($7 million, reportedly).
The market introduced an electronic trading system, named Placing Platform Ltd. in 2016, but it has been slow to catch on. Lloyd's has set a goal for 80% of its business to be conducted using the system in the first quarter of the year.
Using its emergency trading protocols in the wake of the coronavirus pandemic, the corporation has directed insurers and brokers in the market to use either the PPL platform to place business or do so by email.
Lloyd's said the test two weeks ago had been a success, adding that it was confident its protocols "will enable the market to continue trading during the closure."
A spokesman for Lloyd's told Law360 that up to 70% of business had moved over to electronic placement before the pandemic.
The spokesman also reaffirmed the commitment to the corporation's modernization program. "It is a multi-year program, with profound levels of support and engagement from stakeholders across the marketplace," he added.
--Editing by Ed Harris.
Update: This story has been updated to add further comment from Lloyd's.
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