We announced in April our estimate of the cost of Covid-19 claims for our first party business (contingency, accident and health, marine, property and reinsurance) to be around US$170m net of reinsurance.
In determining this figure, we made a number of assumptions including that events would resume in September this year which would lead to a normalisation in the levels of contingency claims. Given the evolving status of Covid-19 we no longer expect this to be the case.
As our book of business is heavily weighted to the US and UK, with the largest segment being conferences, our clients are still largely unable to operate as restrictions on holding events persist. 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. In addition, we anticipate further claims based on our exposure for events in 2021.
The combination of all these factors means that our total estimate for first party Covid-19 claims has moved from US$170m to US$340m net of reinsurance, with almost of all of the increase caused by further event cancellation losses. This revised figure assumes a resumption to some form of normality in the second half of 2021. Were this not to be the case, we estimate that we would have another US$50m of further claims net of reinsurance.
We have also considered the recent FCA judgement on business interruption wording and do not expect this outcome to have a material impact on Beazley.
We continue to see improving growth prospects across our portfolios of business. This is primarily driven by continuing rate improvements, with an overall rate change of 13% at the end of August. We estimate that the overall growth for 2020 will be in the mid-teens.
Looking towards next year we expect these rate improvements to continue, and are again planning for double digit growth in 2021. We have contemplated this growth within our capital planning and, following the equity raise and LOC extension earlier this year, are able to take full advantage of the opportunity that lies ahead of us.
Investments returned US$136m (or 2.2%) up to the end of August. Whilst we have benefited from recent improvements in investment markets, we remain relatively cautious on taking investment risk given the continued uncertainty surrounding the global economy.
We will give further updates in our Q3 trading statement on 6th November.
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