04/06/2020

Lloyd’s & the London Market’s Response to COVID-19

As part of its measure to protect employees from the spread of coronavirus, Lloyd’s closed the underwriting floor of its office building March 19 and all syndicates have moved to remote working. The corporation and its syndicates had extensively tested their systems in preparation for this eventuality and the transition to remote working has gone exceptionally well, given the speed and scale of the change.

Despite a smooth transition, there are changes in how Lloyd’s is approaching business, at least for the foreseeable future. While there is still much uncertainty, the next few weeks will provide more clarity.

Across all lines of business, we are seeing four consistent themes.

  1. Specific COVID-19 insurance is unavailable. 
  2. Lloyd’s is continuing to work on clear guidelines around extensions, payment terms, etc. THB Group, AmWINS’ London Broker, along with the London & International Insurance Brokers Association and other industry groups are working closely with Lloyd’s at all levels to expedite these communications. 
  3. As working from home has made responses slower and new business and renewals are taking longer than before, submissions need to be in early, well ahead of the renewal date, with full underwriting information available from the outset. This will give underwriters the entire picture and help ensure quotes are accurate. Negotiation after the fact will prove more difficult.  
  4. Syndicates are focusing on their existing clients and accounts. Therefore, trying to get new opportunities to them is proving difficult. This may become easier after 4/1.  

Additionally, our specialists at THB have compiled the following London updates for specific lines of business that retailers can use to prepare their insureds for upcoming renewals or new business placements. 

 

Property

One reason for the slowed response on Property accounts is that many Lloyd’s syndicates outsource their CAT-modeling to India, which is in now on complete lockdown.

In response to COVID-19, policy wording and sub-limits will be reviewed and underwriters will try to ensure that Property placements are for actual Physical Loss or Damage. They will look for Pandemic coverage, Civil or Military Authority coverage and other coverages that impact Business Interruption to be placed separately.

Additionally, Loss of Attraction and other similar coverages will be excluded or sub-limited to provide very small limits.

The next issue to arise will be Business Interruption. As an insured sees their business revenue drop, especially in the Hospitality sector, they will look to reduce their limits. Does this mean returned premiums? How can revenue be accurately predicted with the end of the pandemic unknown? There are many questions, but mechanisms will need to be put in place that are fair to both parties as these conditions continue to develop.

 

Professional Lines

There are mixed responses among carriers to the coronavirus issue. Some have started to decline new business, but the majority are still open. A few syndicates are applying COVID-19 exclusions, however the majority remain silent.

Employment Practices Liability (EPL) markets have withdrawn from new hotel, restaurant, retail and leisure business. We anticipate the EPL market to become more difficult, with higher rates and more exclusions expected if there is a recession. There have been a few notifications made on D&O claims, but nothing compared to the scale of Business Interruption claims in the Property market.

 

Marine

U.S. Cargo

Numerous facilities are still writing U.S. Cargo business such as THB Cargo Line Slip, Chubb 100 and A to B, in addition to the other 30 Cargo underwriters in London. Rate increases and changes were taking place before COVID-19 because of market conditions. Wholesale brokers with knowledge of the different appetites of each syndicate/company can help retailers place business accordingly.

Hull & Liability (Including Ports and Terminals)

Marine capacity is still available and unchanged for now. Extensions are by no means guaranteed, reinforcing the need for early renewal submissions. Renewals and new business are having a COVID-19 exclusion applied by a majority of Lloyd’s syndicates and company markets.

The hardening of the market is expected to continue or even increase as underwriters’ investment income drops off with the current economic downturn. As such, accounts with consistent and substantial losses will find it difficult to find new market or alternative quotes. This will be in either the form of increased rating or reduced cover, or both.

 

U.S. Transportation

There are no notable changes in rating for the U.S. Transportation market and we have not seen many requests for policy cancellation thus far during the pandemic. Underwriters have advised that they will review insureds requests for cancellation at pro rata on a case-by-case basis.

 

Liability

Depending on the class of business and/or exposure type, some underwriters will look to add an “Organic Pathogen” exclusion on new business quotes. This exclusion is a broader version of the Pollution / Mold / Fungi exclusion included on most GL policies. 

Contingency and Event Cancellation insurers are seeing claims coming at an alarming rate. Event cancellation insurance can still be obtained, however it will include a COVID-19 / Organic Pathogen exclusion.

 

Aviation

As COVID-19 is going to have a significant impact on the aviation sector, it is too early to comment on what effects it will have on market capacity and appetite changes. 2020 premium income will be massively reduced as a result of aircrafts being grounded and this will only reinforce, and likely accelerate, the hard market conditions we have been seeing over the last 18 months.  

Major airline policies are predominately placed on an adjustable basis. Therefore, any premium relief or returns will be taken into consideration at policy expiration. Severe instances are being considered on a case-by-case basis

This will ultimately impact the market as a result of loss of income, outweighing any of the increases applied over the last 18 months and undoubtedly having an indirect impact on capacity and appetite.

 

Conclusion

The COVID-19 pandemic has and will continue to make challenging market conditions even more difficult. While Lloyd’s remains open for business and a strong source of capacity for many industry segments, it’s important for retailers to prepare their clients for the challenges that lie ahead and begin marketing strategies early to account for changes in coverage and limits offered.

With the uncertainty that lies ahead, AmWINS recommends avoiding policy extensions when possible. Binding the policy in hand and locking in terms now is a better strategy than delaying and potentially facing more difficult conditions down the road.

 


 

About THB Group

THB is in continuous contact with our carrier and syndicate partners to stay informed on all changes to the London market’s coverage response and positions related to COVID-19. Today’s reality is a new way of working, but we remain committed to operating as business as usual and providing our clients with unmatched specialty insurance solutions. Our award-winning claims team is also here to help retailers navigate the claims process and deliver the best results for their insureds.

THB Group is a specialist international (re)insurance broking and risk management firm. Headquartered in London, THB operates one of the largest and most successful Lloyd's broking operations in the specialty market sector. As part of AmWINS Group, the largest independent wholesale distributor of specialty insurance products in the United States, THB has the commercial and intellectual resources required to meet the most exacting demands of clients around the world.

Contact Us

To learn more about how AmWINS can help you place coverage for your clients, reach out to your local AmWINS broker.  If you do not have a contact at AmWINS, please click here.

Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.

(c) 2017 AmWINS Group, Inc.

Most Popular Insights

Employment Practices Liability: #whatstrending

08/18/20

Employment practices liability (EPL) insurance in the U.S. marketplace has always been affected by social trends. This article explores the top factors influencing buyer behavior, product development and underwriting appetite associated with EPL coverage.​

Unpacking Warehouse Legal Liability

07/28/20

Warehouse Legal Liability is a complicated line with many gray areas and multiple interpretations of its coverages. This article discusses coverage triggers, legal vs. contractual liability and the importance of warehouse receipts.

5 Strategies for Successful Small Business Renewals During COVID

07/21/20

In the current economic climate, many small businesses are struggling and some may even fail. Despite these challenges and the continued hardening market, there is opportunity for retailers to write and retain business. This article provides guidance on navigating the complex small business marketplace and helps retailers fine tune their understanding of what insurable risks will look like over the next 12 to 24 months.

What Product Recall Insurance and Risk Mitigation Plan Is Right for Your Clients?

07/21/20

​Product recalls are one of the most damaging events a business may encounter. In order to effectively respond to an incident, companies must be prepared with proper risk management strategies. As policy wording varies, it's also critical to ensure your clients have the right policy type in place to appropriately address their first- and third-party exposures.

Is Your Insured’s Website Compliant with the Americans with Disabilities Act?

07/17/20

Court rulings, have extended the Americans with Disabilities Act (ADA) to apply to websites that are "heavily integrated" with and serve as a "gateway" to a physical stores/services. As a result, companies are now finding themselves targets for ADA claims based on the inaccessibility of their websites and media by those who are disabled.

State of the Market - Q2 2020

06/15/20

Our Q2 2020 State of the Market report provides a holistic view of highly impacted industry segments as well as overall market trends. This report is designed to help our retailers gain the knowledge they need to retain accounts, write new business, overcome challenges and capitalize on opportunities that do exist.

10 Catastrophe Claim Tips for Severe Weather Season

05/27/20

Severe weather can be unpredictable and strike at any time. Help your clients be prepared in the event their property is damaged by a hurricane, tornado, hailstorm or similar disaster with these 10 catastrophe claim tips.

On-Demand Webinar: COVID-19 Economic Impact and Future Outlook

05/15/20

As a result of the COVID-19 crisis, our industry is facing a broad array of challenges that impact insureds of every size and in every industry. In the first of a series of webinars, we hear from an economist on the financial impacts of COVID-19 and what we can expect in the future. This webinar is intended to complement your conversations with clients about how to plan for the next 12 to 24 months.

Lloyd's CEO and Property Underwriters Share COVID-19 Response and Market Update

05/11/20

This podcast features an update from John Neal, CEO of Lloyd’s, on the state of the Lloyd's market and their response to COVID-19 as well as a panel discussion with London Property underwriters on how they view the pandemic's impact both the Property sector and their syndicate's business.

Lloyd's CEO and Casualty Underwriters Share COVID-19 Response and Market Update

05/11/20

This podcast features an update from John Neal, CEO of Lloyd’s, on the state of the Lloyd's market and their response to COVID-19 as well as a panel discussion with London Casualty underwriters on how they view the pandemic's impact both the Casualty sector and their syndicate's business.

Lloyd's CEO and Professional Underwriters Share COVID-19 Response and Market Update

05/11/20

This podcast features an update from John Neal, CEO of Lloyd’s, on the state of the Lloyd's market and their response to COVID-19 as well as a panel discussion with London Professional Lines underwriters on how they view the pandemic's impact both the Professional Lines sector and their syndicate's business.

Flood 101: What to Know About Standard Flood Insurance

04/28/20

Ninety-eight percent of all United States counties were impacted by a flood event in 2018, yet many property owners remain unaware of their true risk of flood or what their existing policies cover. This article highlights key statistics about flood risk and outlines the differences between the National Flood Insurance Program and private market flood insurance.

Professional Lines Challenges and Market Response During the COVID-19 Crisis

04/28/20

The COVID-19 crisis has created a rapidly changing environment for the Professional Lines market. With the uncertainty of how claims will develop and the potential for increased exposure, retailers must be proactive. In this article, AmWINS specialists share their insights on why this is more important now than ever, including reactionary underwriting trends, D&O policy exclusions and impacts to EPLI, as well as the threat for increased cyber attacks and crime losses.

Small Business and Personal Lines During the COVID Crisis

04/22/20

Loss of revenue caused by stay-at-home orders due to the coronavirus pandemic has affected small businesses and the insurance industry serving them significantly. As retailers and carriers prioritize their focus to adapt to the “new normal” of daily transactions, underlying market dynamics remain unchanged. In this article, our experts share their insight on the current changes that we are seeing the small business and personal lines market, and how to navigate the market a this time of uncertainty.

Mind the Gap: COVID-19's Impact on the Logistics Industry

04/15/20

The disruptive impact of the COVID-19 outbreak on supply chains is already having a pronounced effect on the world of logistics and logistics insurance. Port closures, demand surges and production shifts are requiring nimble response to keep up with change. This article arms insurance brokers with the information needed to understand the changes taking place and plan for what is likely to occur in the months ahead.

Navigating the Casualty Market’s Response to COVID-19

04/15/20

The Casualty market’s response to COVID-19 is continuously evolving. With a wide array of factors already impacting this sector pre-crisis, segments of the Casualty marketplace are responding to the pandemic differently. In this article, our industry specialists share overall themes in the Casualty market and take a closer look at how various segments are being impacted.

Top COVID-19 Issues Impacting Builder’s Risk Insurance

04/15/20

The COVID-19 pandemic is causing historical disruption to the construction industry. These changes mean that risk mitigation strategies need to be implemented or revisited, policy language should be reviewed, and carriers should be apprised of all changes at the work-site. In this article, AmWINS specialists examine the major areas of concern for Builder’s Risk insureds, including government-mandated shutdowns, supply chain-driven slowdowns and policy wording that could limit coverage, and provide guidance for retailers to achieve the best results for their clients.

State of the U.S. Logistics Insurance Market

04/10/20

For decades, the logistics insurance market has been considered a sub-market of the cargo or ocean marine market. However, the continual rise of e-commerce and its effect on the global supply chain has carved out a complex and expansive industry niche. This article provides insight into the various lines of coverage, the specialized underwriting approach, and rate surges within the U.S. logistics insurance market.

Lloyd’s & the London Market’s Response to COVID-19

04/06/20

During the COVID-19 pandemic, Lloyd’s remains open for business and syndicates have successfully transitioned to working from home. However, there are notable changes in how the London market is approaching business. In this article, specialists from THB, AmWINS’ London broker, share their insight on consistent themes across the London Market as well as updates on various lines of business.

COVID-19 Claims Advice

04/02/20

There have been a lot of questions regarding COVID-19, in particular about coverage and claims handling. This claims advice is intended to offer guidance to help our retail clients through these difficult times.

Sign Up For Our Monthly Newsletter

Sign Up