Reinsurance News

Insurers welcome FCA update on pandemic BI claims

1st June 2020 - Author: Matt Sheehan

Zurich Insurance Group and RSA are among those to welcome the update from the Financial Conduct Authority (FCA) as the UK regulator seeks to obtain legal clarity on business interruption claims related to the COVID-19 pandemic.

After consulting with 56 insurers over the past month, the FCA announced today that it has identified a sample of 17 policy wordings that it believes represent the key BI issues that could be disputed.

It will now move ahead by inviting insurers to help take this representative sample of cases to court, with the aim of obtaining a court declaration to resolve contractual uncertainty.

Policies by Zurich and RSA were among those identified by the FCA, meaning both companies will be invited to participate in the High Court test case.

Zurich currently believes it has limited exposure to BI claims, and forecasts that its total P&C claims cost for the full year will remain in line with the $750 million disclosed in its Q1 update.


At present, the FCA believes that most SME insurance policies are focused on property damage so in the majority of cases insurers are not obliged to pay out in relation to the coronavirus pandemic.

However, in the event that the UK High Court were to judge that all industry wordings reviewed in the FCA process do provide cover for business interruption in relation to COVID-19, Zurich estimates this would result in an additional $200 million of claims, net of reinsurance.

RSA similarly reported that its estimated exposure to COVID-19 claims has not changed since its Q1 update, which put costs at around £25 million, net of reinsurance.

This included valid claims related to travel, wedding cancellation (UK only) and commercial lines business interruption and related policies.

But the company also noted that it has a comprehensive reinsurance program, with core catastrophe covers in place across the group, as well as a group-wide aggregate protection.

RSA maintained that these arrangements are expected to provide “substantial protection” in the event that downside claims scenarios were to arise.

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