Briefing: Lloyd’s of London’s NHS plan flies in the face of rising exposure fears

By Jon Guy

As the National Health Service (NHS) braces itself for a new round of worker strikes, Lloyd’s has been making headlines with a reported plan to create a product that could be used to pay for the additional costs of the UK’s health services fighting another pandemic.

According to the report, Lloyd’s offered to create a scheme that would provide support for times when the NHS was under extreme pressure – and the increased costs that came with those pressures.

On the face of it, the proposal can be viewed as an effort by the insurance sector to look to support those in need, given the importance of the NHS in the fight against Covid-19.

The approach has generated headlines in the national and trade media, but it has been met with a cool reception in Whitehall – with the government’s view that it can find a cheaper way to fund any additional costs should we see another pandemic.

Given the hundreds of billions of pounds that the Covid pandemic cost the UK purse – and the unseemly row between insurers and their commercial clients over business interruption cover during the pandemic, which ended in the Court of Appeal – you would be forgiven for thinking the last thing the industry would do is seek to increase its exposure to the effects of a future pandemic.

The original story, run by The Guardian, included quotes from Lloyd’s chief executive John Neal and its chair Bruce Carnegie-Brown, but was short on the details that would have the scope of what exactly was proposed.

An easy friendship? 

The UK insurance industry and the government have always had an uneasy relationship when it comes to the cover of extreme events.

Pool Re, for example, was established as the government backstop for major terrorist risks at the height of the threat to the UK mainland from the IRA.

Flood Re, on the other hand, was created due to the industry’s reluctance to meet the rising costs of flood damage on properties that were clearly in flood prone areas and was the result of a long running – but always fragile – agreement where flood insurance was provided as long as investment in flood defences was maintained.

At a time when the industry has been warning coverholders over the level of exposure to the impacts of climate change and the London market is wrestling with the impacts of the war in Ukraine, cyber cover and its modernisation blueprint, a proposal to bail out the NHS at time of extreme stress, is unexpected to say the least.

I would be interested to see the capacity that is willing to back the scheme.