How Lloyd’s is handling claims differently with COVID-19

In response to the ongoing pandemic, the Lloyd’s market is changing the way claims are handled when multiple syndicates write one risk.

“One challenge with COVID-19 is the subscription nature of the market, whereby it is often several syndicates writing one risk. This could increase the time required to adjust a claim so Lloyd’s has streamlined the claim-paying process,” Hank Watkins, New York City -based regional director and president, America’s at Lloyd’s, said in an interview with Canadian Underwriter.

The Corporation of Lloyd’s is not an insurance company but oversees a market comprised of brokers, syndicates, managing agents and coverholders. It is the syndicates themselves who actually take on the financial the risk and pay the claims. In some cases, more than one syndicate is on risk on one policy.

“With COVID-19, Lloyd’s has expanded the ability of a lead syndicate to adjust a claim on behalf of all the participating syndicate. So the Lloyd’s market is able to pay claims much more quickly now than would have been possible even six months ago,” Watkins said.

In a separate announcement June 2, Lloyd’s announced Marc Lipman is now its new president and attorney-in-fact for Canada. Lipman’s immediate past job was chief operating officer for American International Group Canada. Watkins was interviewed before Lipman’s appointment was made public.

In an estimate released May 14, Lloyd’s said its market will pay “in the range” of Us$3 billion to $4.3 billion as a result of the far-reaching impacts of COVID-19.

About 10% of that total estimate comes from Australia, Canada, China and Japan put together, said Watkins. The Lloyd’s market does not have specific numbers for claims from Canada.

“We do not anticipate a significant amount of the COVID-19 claims will be coming out of Canada,” said Watkins.

The numbers released May 14 are based on what Lloyd’s calls major claim returns (MCRs). Lloyd’s went out to the market and asked those who have exposure to give the Corporation of Lloyd’s as granular view of the exposures to COVID-19 as they can in the classes of businesses they write, said Watkins.

An MCR for a pandemic is not as easy as an MCR after a wind storm, for example. As Watkins noted, this is because a syndicate could potentially have seven or eight classes of business exposed to COVID-19.

With the MCRs, the Lloyd’s market has to come up with a number that regulators believe is sufficient to project what the exposure is in their jurisdictions.

Watkins told Canadian Underwriter that lines exposed to COVID-19 could include:

-General liability, in the event that supermarkets or pharmacies are sued by plaintiffs alleging they got sick there;

-Directors and officers’ liability for publicly traded companies whose share price was impacted by an alleged failure on the part of the board to plan for COVID-19; and

-Nursing homes.

Several Canadian long-term care facilities and nursing homes have been named as defendants in lawsuits. About 82 percent of the more than 6,800 COVID-related deaths in Canada have been linked to long-term care, Canadian Press reported Tuesday.

Feature image via iStock.com/duncan1890