UK insurer Beazley doubles its Covid-19 loss estimate
Shares slumped 15% in their worst one-day fall on record as the firm forecasts claims of up to $340m net of reinsurance
London — Specialist insurer Beazley is bracing for claims linked to the coronavirus pandemic to double to $340m, with almost all the estimated increase arising from events cancelled in the wake of a recent spike in infections.
Shares in the London-based company, which business is heavily weighted towards the US and UK, had slumped 15% in their worst one-day fall on record by 7.07am GMT.
“With the largest segment being conferences, our clients are still largely unable to operate as restrictions on holding events persist,” Beazley said in a trading statement on Tuesday.
The forecast claims rise, which is net of reinsurance, offsets what the firm described as improving growth prospects across its wider business portfolio, primarily driven by higher insurance premium rates, with an overall rate rise of 13% at end-August.
Beazley boss Andrew Horton also blamed the hike in the claims estimate on exhaustion in the reinsurance market, in which insurers look to hive off a portion of their exposure to other insurers.
“We estimated some return to normality in September,” Horton said, adding that he doesn’t expect conferences to resume until the second quarter of next year.
The Lloyd’s of London syndicate member said that if this prediction proves inaccurate, claims could rise by a further $50m net of reinsurance.
“The magnitude of the increase is somewhat surprising and we believe reflects an exhaustion of the reinsurance cover,” analysts at JPMorgan said, as it forecast a $123m fall in full-year, pre-tax profits to a $55m loss.
Beazley said it had considered the recent UK Financial Conduct Authority judgment on business interruption wording and did not expect the outcome to have a material impact on its figures.
Fellow Lloyd’s syndicate member Hiscox said in April that it expected to pay up to $175m to settle claims arising from travel, events and mass gatherings cancelled due to Covid-19 if disruption from the pandemic lasted more than six months.
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