RSA faces £104m impact from FCA BI test case verdict

UK's RSA Insurance Group has estimated a financial impact of around £104 million as a result of  the High Court judgment in the Financial Conduct Authority’s (FCA) business interruption (BI) test case on COVID-19 claims.

RSA was one of the eight insurers directly involved in the court hearings, participating as defendant in relation to five of the policy wordings, across three schemes. The case aimed to gain a definitive resolution on disputed BI claims.

The High Court handed down the judgment in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues.

The interpretations of some provisions impacting RSA were upheld by the court and some were not, said the insurer.

RSA estimates the additional financial impact to RSA of today’s judgment to be approximately £104 million on a gross basis across its portfolio of relevant business interruption policies. After the application of our catastrophe reinsurance protection, RSA estimates the impact of this judgment to be around £85m which is in turn expected to reduce further through qualifying as a loss covered by the group-wide aggregate reinsurance programme."

"The Court judgment, together with this strong trading performance and greater clarity on market responses to COVID-19, makes it appropriate for us to take the next step towards normalising our financial profile," the company said in a statement.

The insurer, however, noted that the financial impact of the judgment will not be fully resolved for some time due to the inherent complexity of business interruption claims and "complexE court judgment across the different policy wordings. But, the reinsurance protection is expected to apply should the figures increase.

RSA also noted that the estimated cost of COVID-19 related claims reported at the half year has not changed materially, while the third quarter to date has seen the emergence of additional frequency benefits related to COVID-19.

Scott Egan, CEO of RSA UK and International, said: “Throughout the pandemic RSA has been settling claims from both commercial and personal lines customers, as well as participating in industry initiatives to support communities around the UK. We’re committed to continuing to play our part to help individuals and businesses manage and recover from the impact of Covid-19.

“The test case set out to consider how a number of business interruption policy wordings should respond to Covid-19, and today’s judgment is an important milestone for customers and for insurers. It is also a complex judgment, and it will take some time for all parties involved to review it. We are now working through the judgment to determine next steps, and we will continue to work with our partners to communicate fully with our policyholders throughout the coming weeks, whether they have currently made a claim with us or not.”