New data from the Financial Conduct Authority (FCA) shows a significant slowdown in the rate at which claims are being paid out for policies related to the COVID-19 business interruption (BI) test case in the UK.
In total, reported claims payments now amount to £757 million as at June 14th, which represents an increase of just 8.1% on the roughly £700 million in payouts that had been recorded by the FCA in the previous month.
For comparison, the monthly increase had been 16.7% from April to May (£600 million to £700 million) and 25.5% from March to April (£478 million to £600 million), so the rate of increase is now less than half it was in the previous month, and less than a third of the monthly change before that.
And this slowdown does not indicate that insurers are approaching the conclusion of the claims process, as only 20,347 BI policyholders (54%) of the 37,702 that have had claims accepted have received at least an interim payment, compared with 17,527 (48%) out of the 36,414 last month.
Breaking these figures down further, the FCA’s June 14th data shows that the aggregate value of the interim/initial payments made for the 4,188 unsettled claims where such payments have been made is £289,595,404, compared with £268,248,492 on 3,632 unsettled claims and as of the previous May 5th data.
And the aggregate value of the payments made for the 16,159 claims where final settlements have been agreed and paid is £467,251,258, compared with £433,125,666 on 13,895 claims last month.
Hiscox and MS Amlin continue to be the two firms most conspicuously lagging in their BI test case settlements, with Hisox having made final payouts on just 537, or 5.3%, of its more than 10,000 pending or approved claims as at May 31st, with interim payments made on a further 1,469, or 14.6%.
MS Amlin has similarly made full payouts on 648, or 17%, of the 3,808 claims approved between its MS Amlin Insurance SE and MS Amlin Underwriting Limited businesses, and interim payments on another 255, or 6.7%.
Other insurers with payout ratios well behind the 54% average across the FCA’s data include Argo, Canopius, Chubb, HDI, QBE, QIC and Zurich.
In January, the UK Supreme Court decided to uphold the judgement on the FCA’s BI insurance test case, which was first brough forward by the financial regulator in May 2020 to seek legal clarity on whether insurers were obligated to pay out on BI claims related to the COVID-19 pandemic.
After the UK High Court passed its long-awaited judgement on the FCA’s BI insurance test case in September 2020, ruling in favour of policyholders on the majority of key issues, the UK Supreme Court granted permission for the FCA and a group of insurance and reinsurance companies to appeal its ruling.
At the time of the Supreme Court’s ruling, analysts speculated that some 370,000 small businesses may have been affected by the outcome of the case, with a potential £3.7 billion to £7.4 billion of claims on the line.