Lloyd’s of London has swung to an annual loss as it paid out more than £21bn to customers, for claims relating to the war in Ukraine, Hurricane Ian and other events.
The world’s biggest insurance market reported a pre-tax loss of £769m for 2022, compared with a profit of £2.3bn in 2021. Its payouts included “substantial claims” related to Ukraine and £2bn for property damage from Hurricane Ian in Florida.
That hurricane and other natural catastrophes caused $275bn (£223bn) worth of damage last year and cost insurance companies $125bn, according to the reinsurance firm Swiss Re.
Lloyd’s has set aside £1.4bn to cover Ukraine claims, largely for aircraft stranded in Russia, as well as ships trapped in the Black Sea. A ship is deemed lost and becomes a claim after 12 months, said Bruce Carnegie-Brown, the Lloyd’s chair. He said the £1.4bn reserve was an early-stage number and could go up.
More than 400 aircraft, worth almost $10bn, have been stuck in Russia since western countries imposed sanctions on the country after Moscow’s invasion of Ukraine in February 2022.
The planes are covered by Russian insurers, and Lloyd’s is one of the western firms that has provided contingent insurance to the Ireland-based lessors that own the aircraft. If the Russian insurers do not pay out, the lessors’ insurance policies would be triggered. Carnegie-Brown said the Russian insurers are “interested to pay but are prohibited by sanctions from moving money”.
Lloyd’s now faces a “mega trial” in London from a number of claimants, including AerCap, the world’s biggest aircraft leasing firm.
The Dublin-based company said last week it was “inconceivable” that it would not recover some losses from insurers over jets stranded in Russia. AerCap is the largest claimant and is suing insurers including Lloyd’s and AIG in London’s high court for up to $3.5bn over the loss of 116 aircraft and 23 engines under its all-risks insurance policy, or $1.2bn under its war risks policy.
Carnegie-Brown said there was still a dispute over whether the conflict was a war. Some insurers have refused to pay because they argue that the planes are not lost yet. Some jets are being used by the Russian flag carrier Aeroflot while others are being used for spare parts.
The judge ruled the lawsuits should be dealt with in one large trial – the biggest in the insurance industry in years – to save time. Carnegie-Brown welcomed this but added that the trial could easily last until the end of 2024. A start date for the trial has not been set yet.
Thursday’s results showed Lloyd’s made an underwriting profit of £2.6bn last year, up from £1.7bn in 2021, as written premiums climbed by 19% to £46.7bn. Prices rose 8%. It was in the red overall because of an investment loss but expects this to reverse in the coming years.
The group said it made a one-off £2,500 payment to the half of Lloyd’s staff who earn less than £75,000 a year in September to help with the soaring cost of living, and will make a further £1,500 payment in April.
“The operating environment has been difficult for everyone,” Carnegie-Brown said. “The overlapping crises we’ve faced have created a complex set of challenges for us to tackle: from the risk of recession to the impacts of inflation on the cost of living and on claims. It has now been a year since Russia’s invasion of Ukraine: an event that has caused shock waves around the globe.”
• The headline of this story was amended on 24 March 2023 to clarify that the £21bn of claims were not solely for Hurricane Ian and Ukraine
