Specialist re/insurer Hiscox has said that after the Supreme Court’s ruling in favour of insureds earlier today in the appeal of the business interruption (BI) insurance test case, it has added a further $48 million, net of reinsurance, to its 2020 estimate for COVID-19 BI losses.
This morning, the UK Supreme Court upheld the judgement on the Financial Conduct Authority’s (FCA) BI insurance test case, stating that the appeals of both the FCA and the Hiscox Action Group are “substantially allowed”, while the insurers appeals are dismissed.
In response to the final judgement, Hiscox has welcomed clarity and said that the claims settlement process has commenced.
According to the specialist insurer and reinsurer, the Supreme Court’s judgement confirms that less than one third of the company’s 34,000 UK BI policies may respond.
“The Supreme Court largely confirms the outcome of the High Court’s ruling that, except in rare circumstances, cover is restricted to Hiscox policyholders who were mandatorily closed. Fewer than one third of Hiscox’s 34,000 UK Business Interruption policies may respond as a result,” explains Hiscox.
Following the judgement and also as further UK government enforced restrictions were announced throughout 2020, the total Hiscox Group 2020 COVID-19 BI estimate increased by $48 million, net of reinsurance.
At the same time, notes Hiscox, the previously reported additional loss estimate of up to $40 million for event cancellation lines if gov restrictions continued into 2021, will now be recognised in the firm’s 2020 financial results. This is because Hiscox expects that covered events will ultimately be cancelled.
“As previously stated, Hiscox’s exposure to potential business interruption claims arising from further UK government restrictions to contain the spread of COVID-19 has been running off at approximately 8% per month from June 2020, with residual exposure to be fully run off by the end of June 2021. Following the Judgment, the Group estimates exposure to restrictions already announced in 2021 at less than $20 million if restrictions extend to the end of March,” states Hiscox.