Lloyd’s estimates it could pay out up to £5 billion ($9 billion) in pandemic-related claims after the business made a pre-tax loss of £438 million ($771 million) in the six months to June.

About £2 billion ($3.5 billion) of the projected claims payout will be recovered through reinsurance, Lloyd’s says in an earnings release.

The first-half results, which reversed a year-earlier profit of £2.3 billion ($4 billion) pre-tax, were sparked by £2.4 billion ($4.2 billion) in COVID-19 losses after reinsurance recoveries.

It says the virus losses contributed 18.7% to the market’s combined ratio of 110.4%, a marked deterioration from 98.8% a year earlier, and drove the business to an underwriting loss of £1.3 billion ($2.3 billion). In the first-half of last year, it made a £148 million ($261 million) underwriting profit.

If the virus impact was excluded, Lloyd’s made an underwriting profit of £1 billion ($1.8 billion) and the combined ratio improved to 91.7%

Lloyd’s says the results demonstrate the resilience of the business amid very challenging conditions.

CEO John Neal says Lloyd’s remains well capitalised to withstand COVID-19 impacts with an estimated ultimate loss of £3 billion ($5.3 billion) for this financial year. The business has made two successful market-wide capital collections to fund the loss.

“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,” Mr Neal said.

“We have made excellent progress through the first half of 2020, in some of the best underwriting conditions we have seen in a decade.

“But although the indications suggest we are returning to profitability, our focus on performance must remain unerring.”

Lloyd’s Australia GM Chris Mackinnon told insuranceNEWS.com.au the results highlight “the work we’ve been doing on remediation is taking effect and our capital position remains very strong.”

Event cancellation made up 41% of COVID losses in the June half, with property classes accounting for the second largest portion at 25%. The remaining losses comprised of casualty (18%), credit lines (10%), marine (4%) and specialty (3%).

About 58% of the losses came from the US and customers with global risk programmes, followed by the UK on 16% and 10% from Australia, Canada and Asia combined.

Lloyd's says it will press on with efforts to improve the way the marketplace operates, by raising efficiency and improving the claims processes through increased technology investments.

In November an update to the Future at Lloyd’s Blueprint, a strategy to create the world’s most advanced insurance market, will be provided, Mr Neal said.