Hiscox expects £100m hit from landmark BI test case judgement

Specialist re/insurer Hiscox, which participated in the FCA's business interruption (BI) test case alongside seven other insurers, has responded to the  High Court judgment.

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

Hiscox agreed in May to assist in the case after coming under particular pressure from businesses that believe their business interruption claims resulting from the COVID-19 pandemic are valid. But the insurer so far always maintained that its policies cover property damage and do not respond to pandemics.

The judgment clarifies that fewer than one third of Hiscox's 34,000 UK business interruption policies may respond. Coverage under these policies is essentially limited to those customers who were mandatorily closed by Government orders, and then only in certain circumstances.

As a result of the judgment, the group estimates additional COVID-19 claims arising from business interruption to be less than £100 million net of reinsurance. This encompasses claims from all divisions including Hiscox Re.

The re/insurer noted that this estimate is a reduction of £150 million from the upper end of the group's previously published risk scenario.

Hiscox stated that it is assessing the judgment in detail to ascertain how the court's conclusions should be applied to the claims and circumstances of individual Hiscox policyholders. It said, any issues not addressed by the judgment will be assessed on a case-by-case basis as part of the normal insurance loss adjustment process for claims.

The re/insurer also noted that all parties involved now have an opportunity to appeal some or all of the judgment to a higher court, and the outcome of any appeal could impact loss estimates.

"Hiscox recognises these are extremely difficult times for businesses and regrets any contract dispute with customers, which is why it is committed to seeking an expedited resolution through this Industry Test Case," the company said in a statement. "In line with FCA Guidance, Hiscox will communicate an update on the Industry Test Case to relevant policyholders through the appropriate channels.

"The Group remains focused on supporting its customers and employees through this challenging period. There is no change to any of the estimates or guidance provided in the company's interim results published on 3 August. Hiscox's capital position remains strong and the Group maintains an A rating for financial strength from S&P. The Group is deploying capital for growth in an improving market and will provide a more detailed update of its performance in its trading statement scheduled for Monday 2 November."