Lloyd’s of London is set to pay out up to £3.5bn to customers as a result of the coronavirus pandemic.
The insurance market said it was on a par with the impact of 9/11 but that it expects the eventual overall cost of COVID-19 to the industry to be “far in excess” of that and other catastrophes.
Lloyd’s estimates that overall, when taking into account falling investment values as well as the cost of paying claims, the global insurance industry stands to lose £164bn this year.
Chief executive John Neal said: “The global insurance industry is paying out on a very wide range of policies to support businesses and people affected by COVID-19.
“The Lloyd’s market alone is currently expected to pay claims amounting to some $4.3bn (£3.5bn), making it one of the market’s largest pay-outs ever.
“What makes COVID-19 unique is the not just the devastating continuing human and social impact, but also the economic shock.
“Taking all those factors together will challenge the industry as never before, but we will keep focused on supporting our customers and continuing to pay claims over the weeks and months ahead.”
Lloyd’s said its preliminary pay-out estimate was in the range of £2.4bn-£3.5bn based on the assumption of “material social distancing rules and restrictions” lasting until the end of June, and that this could rise further if the current lockdown continues into another quarter.
It said 15% of the pay-outs covered the UK with the remainder covering the rest of the world.
Nearly a third of the claims (31%) were for cancellations of major events such as the Olympics with others covering areas such as property insurance and trade credit.
The level of total pay-outs expected by Lloyd’s compares to a $4.8bn (£3.9bn) total following hurricanes Harvey, Irma and Maria in 2017 and $4.7bn (£3.8bn) resulting from the terror attacks of 11 September 2001.
“Lloyd’s believes that 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,” it said.
For the insurance market as a whole, Lloyd’s estimates losses on claims totalling £86bn, plus an additional £77bn hit as the value of investments collapses.
In the UK, small businesses are challenging insurers who they say have denied them payments for disruption.
The insurers say most small business policies do not cover the pandemic.
Among those under scrutiny is Lloyd’s of London insurer Hiscox.
Mr Neal said the UK domestic property sector accounted for less than 2% of the Lloyd’s market, adding that “any valid claims should be paid”.