Lloyd’s suffered an £887 million ($1.6 billion) loss last year and substantially increased its payout estimate for COVID-related claims.

The market now expects to pay customers £6.2 billion ($11.22 billion) for pandemic-triggered claims, which is £1.2 billion ($2.17 billion) more than it estimated six months ago. Reinsurance covers £2.6 billion ($4.7 billion) of the gross forecast.

Excluding virus losses, Lloyd’s delivered an annual underwriting profit of £757 million ($1.37 billion), a significant improvement in underlying performance. COVID-19 claims added 13.3% to the market’s 2020 combined ratio of 110.3%.

CEO John Neal says the past year was “extremely challenging” and marked by a global health crisis of a scale never seen before, a high frequency of catastrophe claims and the UK's formal exit from the European Union, driving “further losses and uncertainty”.

“While 2020 will forever be remembered as the ‘year of COVID-19’, the market has suffered threats from two other fronts: the first has been the uncertainty and turmoil driven by Brexit; the second being a significant increase in the number of natural catastrophe events,” Mr Neal said.

“We can be proud of the way Lloyd’s has stood up and demonstrated its resilience through an incredibly difficult period. We are in a strong position to weather the ongoing impact of the pandemic.”

The “busy” natural catastrophe season amounted to an additional £2.5 billion ($4.53 billion) of major claims, and Mr Neal noted 2020 was the fifth largest catastrophe year on record.

Net COVID-19 losses at Lloyd’s came to £3.4 billion ($6.15 billion) last year after reinsurance recoveries.

“Against this unprecedented backdrop we have made good progress across our performance, digitalisation and culture transformation plans,” Mr Neal said. “Continued positive rate momentum will see the market supporting growth for the first time in four years.”

Last year, Lloyd’s streamlined its claims process, automated lower value claims transactions; establishing its virtual underwriting room and launched its Funds at Lloyd’s portal.

The market’s underlying underwriting performance improved significantly through strong rate increases across all classes and underwriting discipline.

Excluding COVID, Lloyd’s – which paid £21.4 billion ($38.72 billion) in gross claims last year – achieved a combined ratio of 97%, versus 102.1% in 2019 and 104.5% in 2018.

Exceptional rate momentum saw the market achieve average renewal rate increases of 10.8% – a positive trend which continued in the first three months of this year.

Gross written premium slipped 1.2% to £35.5 billion ($64.23 billion), dented by a 12% reduction in business volumes across the market, reflecting “the market’s continued focus on the quality of the business it underwrites”.

Performance management and underwriting action taken over the past three years was really starting to “flow through the Lloyd’s portfolio,” Mr Neal says.

While there were improvements in gender balance, Mr Neal says “we must take action to improve the experience of black, Asian and minority ethnic colleagues and ensure that we attract and nurture talent from every community”.

Lloyd’s says its gross COVID claims forecast is made up of £2.6 billion ($4.7 billion) in the US, £1.3 billion ($2.35 billion) in the UK, £1.5 billion ($2.71 billion) in other geographies and £800 million ($1.45 billion) which cannot be attributed to a particular geography.

By category, Accident & Health contingencies made up £2.9 billion ($5.25 billion), property (Direct & Faculty) £900 million ($1.63 billion) and property treaty £700 million ($1.27 billion). Casualty, credit lines and other categories were each half a billion pounds or lower.