The UK and other countries are easing up on the lockdown, but there will be no joy for insurers anywhere. Image Credit: Gulf News Archive

London: The global insurance industry could be hit with losses of $203 billion this year because of the coronavirus pandemic, according to Lloyd's of London, the world's largest insurance exchange.

The projected losses include about $107 billion from underwriting claims, with the rest from insurers' investment portfolios, Lloyd's said. The claims costs are on a par with some of the most catastrophic hurricanes of recent years and could rise further if the virus isn't contained, Lloyd's said.

"Once the scale and complexity of the social and economic impact of COVID-19 is fully understood, the overall cost to the global insurance non-life industry is likely to be far in excess of those historical events," Lloyd's said.

Risk of a deep recession

The pandemic, which has infected at least 4.2 million and killed nearly 300,000, has confronted the insurance industry with its biggest challenge to date. While triggering a deluge of claims related to canceled events, business interruption and other costs, the outbreak has threatened a global recession that's put the payment of many household and business insurance premiums at risk.

As economies ground to a halt, many European insurers withdrew earnings guidance and suspended dividends. In the UK, general insurer Hiscox Ltd. was among the first wave of firms to tap public markets for additional capital after coming under pressure to make good on business interruption policies.

Lloyd's estimates that it will pay out in the range of $3 billion to $4.3 billion to global customers, on a similar scale to the September 11 attacks of 2001.

"The thing that is special about this, is it is impairing the asset values as well as creating liabilities," Chairman Bruce Carnegie-Brown said.

Losses already mount up
Zurich Insurance Group AG may have to pay out as much as $750 million this year due to the coronavirus as it grapples with rising claims and volatile markets that have already triggered profit warnings at rivals.

Europe's second-largest insurer by market value said the claims will hit its property and casualty unit, with $280 million recognized in the first quarter.

While insurers probably haven't seen the worst of the Covid-19 crisis Zurich follows Axa SA and Allianz SE in sketching out an outline of the impact. Profit across the industry will be under pressure from lower revenue and higher claims from event cancellations, bankruptcies and business interruptions.

Some areas may be a bright spot, such as car insurance where less driving will result in fewer road accidents.

Zurich said it's revenues and earnings would also be hit by poor financial markets and weaker economies.