Reinsurance News

UK regulator identifies disputable BI policy wordings

1st June 2020 - Author: Matt Sheehan

As part of its effort to seek legal clarity on business interruption (BI) claims related to the COVID-19 pandemic, the Financial Conduct Authority (FCA) has identified a sample of policy wordings that are representative of the key arguable issues.

financial-conduct-authority-logoThe UK regulator announced on May 1st that it would seek to obtain a court declaration to resolve contractual uncertainty around BI coverage.

It has since approached 56 insurers and reviewed over 500 relevant policies from 40 insurers, identifying 17 policy wordings that capture the majority of key issues that could be in dispute.

Now, the FCA will move ahead by inviting insurers to help take this representative sample of cases to court, putting forward policyholders’ arguments to their best advantage in the public interest.

At present, it is the regulator’s belief 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.


“The court action we are taking is aimed at providing clarity and certainty for everyone involved in these BI disputes, policyholder and insurer alike,” explained Christopher Woolard, Interim Chief Executive at the FCA.

“We feel it is also the quickest route to this clarity and by covering multiple policies and insurers, it will also be of most use across the market,” he continued.

“The identification of a representative sample of policies and the agreement of insurers who underwrite them to participate in these proceedings is a major step forward in progressing the matter to court.”

The following 16 insurers use at least one of the policy wordings in the FCA’s representative sample which will be examined in the test case:

Allianz Insurance plc, American International Group UK Limited, Arch Insurance (UK) Limited, Argenta Syndicate Management Limited, Aspen Insurance UK Limited, Aviva Insurance Limited, Axa Insurance UK plc, Chubb European Group SE, Ecclesiastical Insurance Office plc, Hiscox Insurance Company Limited, Liberty Mutual Insurance Europe SE, MS Amlin Underwriting Limited, Protector Insurance UK, QBE UK Ltd, Royal & Sun Alliance Insurance plc, and Zurich Insurance plc.

Argenta commented on its participation: “Argenta Syndicate Management Limited (“ASML”) is pleased to accept the invitation to participate in the FCA’s Test Case for business interruption insurance, as announced this morning. ASML supports the FCA’s aim to achieve clarity for all concerned in this unprecedented situation and to do so in a manner which provides the quickest route to achieving such clarity.”

The Chartered Insurance Institute (CII) also offered a statement: “We welcome further clarity from the FCA on their process for selecting test cases and support their decision to proceed following in-depth consultation.”

“This is an important intervention from the regulator, and will hopefully avoid the need for lengthy and disruptive court cases to be led by consumers themselves. Ultimately we hope this will mean the courts can reach a decision that is fair, comprehensive and definitive.”

“The Chartered Insurance Institute will continue to monitor and support this process where possible. We believe the clarity this will bring to both the public and insurers alike, will be fundamental to restoring trust in the profession.”

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