UK-based insurer Beazley has doubled its estimate of losses caused by the Covid-19 crisis, blaming an increase in claims on event cancellation cover.
The company said in April that it expected to pay out $170m for Covid-19 claims, net of the reinsurance that it buys to protect itself from large losses, and confirmed that figure at its first-half results in July. However on Tuesday it increased that estimate to $340m.
The increase will raise questions about whether other commercial insurers will also have to increase their Covid-19 loss estimates.
Beazley had previously assumed that events such as conferences would resume in September but that has not turned out to be the case.
“Conferences that were postponed earlier in the year are now being cancelled as are ones due to take place in the final quarter of this year which means our loss estimates have increased,” the company said in a statement. It expected more claims on events due to be held in 2021.
Chief executive Andrew Horton told investors: “We started to see things being cancelled towards the end of August when the UK and other parts of the world were not improving.” He added that the company had used up some of the reinsurance coverage that had protected it from higher losses earlier in the year.
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The new figure assumes “a resumption to some form of normality” in the second half of next year. If that does not happen, Beazley said the claims figure could rise by another $50m.
Beazley’s share price dropped 13 per cent in response to the announcement, and is now down by 40 per cent this year. Shares in fellow Lloyd’s of London insurers Hiscox and Lancashire also fell.
Alan Devlin, an analyst at Shore Capital, said: “While the increase in losses is disappointing, we believe the losses are manageable.”
Beazley also said in its statement that it had little exposure to last week’s High Court judgment in which insurers were told they should pay out on some claims on business interruption policies that they had previously denied.
The company said prices for commercial insurance were rising by about 13 per cent at the end of August, and that overall price rises for 2020 would be in the mid teens. Beazley is planning to take advantage of the higher prices to write more business in 2021.
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