Specialist insurer Beazley has doubled its forecast for insurance claims related to the impact of the coronavirus pandemic to $340m, as it braces for further disruption to business activity.
Almost all of the increase in its estimate stems from event cancellations, as countries appear to be heading into various stages of a second lockdown.
Its shares fell more than 12.5 per cent on the update.
The insurer said this forecast is based on countries returning to some form of normality in the second half of 2021. If this does not happen, Beazley added another $50m onto the prediction.
“As our book of business is heavily weighted to the US and UK with largest segment being conferences, our clients are still largely unable to operate as restrictions on holding events persist,” the company said in a trading statement today.
The claims rise, which is net of reinsurance, will counter the company’s “improving growth prospects across our portfolios of business”, which had been primarily driven by continuing rate improvements.
Beazley reported an overall rate rise of 13 per cent at the end of August.
It added that recent comments from the Financial Conduct Authority on business interruption are unlikely to have a material impact on its estimates.
“The magnitude of the increase is somewhat surprising and we believe reflects an exhaustion of the reinsurance cover,” said analysts at JP Morgan.
The analysts said they estimate Beazley’s surplus cash position at the end of the year will be near the bottom of its preferred range of 15 to 25 per cent, compared to a projection of 22 per cent at the six-month point.
It forecast a $123m fall in full-year profit before tax to reach a $55m loss.
Beazley will report its third-quarter results on 6 November.