Whatâs Going On Here?Lloydâs of London may feel itâs got more in common with Dumb and Dumber than just its lead characterâs name: the worldâs largest insurance market revealed a first-half loss on Thursday that could spell big costs ahead for insurers and insured worldwide. What Does This Mean?Lloydâs â also not to be confused with the British bank of the same name â is an odd fish in the insurance world. The historic marketplaceâs 90 âsyndicate membersâ insure people and businesses, including other insurance companies via âreinsuranceâ. Its broad span therefore makes it a good barometer for the insurance industry as a whole â and that barometerâs currently reading âhigh pressureâ. Over the last six months, Lloydâs made a $530 million loss before tax, largely due to $3 billion of coronavirus-related payouts in the period. Whatâs more, it expects to fork out another $3 billion throughout the rest of 2020. Why Should I Care?The bigger picture: So youâre telling me thereâs a chanceâŚ
Back in March, Lloydâs estimated insurance companies around the world â excluding life insurers â would end up on the hook for more than $100 billion in coronavirus claims due to disruptions to travel, events, and trade. But theyâre not taking it lying down: UK financial authorities are currently contesting insurersâ avowed lack of liability for certain pandemic-related claims which typically apply only in cases of physical damage. The outcome could lead to higher costs (or savings) for insurers everywhere...
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The key measure of an insurance companyâs profitability is its âcombined ratioâ. This shows losses and expenses as a percentage of revenue from premiums, revealing how good an insurer is at profitably selling policies. The Lloydâs ratio was 110% in the last six months compared to 98.8% the same time last year, when the firm made a $3 million profit. Insurers trying to recoup their 2020 losses by charging more for protection could make your travel, health, business â and, yes, parakeet â insurance more expensive. | 