Lloyd’s has welcomed yesterday’s FCA’s test case judgement, describing it as having bought coverage clarity for many policyholders with certain non-damage business interruption insurance extensions.
The financial regulator brought the case forward in May to seek legal clarity on whether insurers were obligated to pay out on BI claims related to the COVID-19 pandemic.
It is thought that some 370,000 small businesses will be affected by the outcome of the court case, with analysts estimating that between £3.7 billion and £7.4 billion of claims could be on the line.
Based on the sample of policy wordings presented by the FCA, the court decided that most, but not all, of the disease clauses provide cover for losses connected to COVID-19.
Lloyd’s says it will now take some time to consider and respond to the implications of the complex judgement for its customers, as well as its impact on the Lloyd’s market, which retains less than 2% of the overall UK property SME market.
The historic specialist re/insurance marketplace believes its extremely strong capital position means makes it well prepared to respond to the financial implications of the High Court’s judgement.
Lloyd’s expects to pay out £5 billion in COVID-19 claims to its customers around the world across a wide range of policies, including event cancellation, property, casualty, and credit.