Hiscox, Zurich, QBE, MS Amlin named in FCA's COVID-19 BI test case

UK's regulator Financial Conduct Authority (FCA) has enlisted eight insurers, including Hiscox, Zurich, QBE and MS Amlin and Arch, to participate in a High Court test case aimed at providing legal clarity on business interruption (BI) insurance relating to the COVID-19 pandemic.

The FCA said that it approached 56 insurers and reviewed over 500 relevant policies from 40 insurers. The authority has identified a sample of 17 policy wordings that capture the majority of the key issues that could be in dispute.

The regulator revealed that it has identified 16 insurers that use at least one of the disputed policy wordings represented in its legal test case over business interruption insurance. These include: Allianz Insurance, American International Group UK, Aspen Insurance UK, Aviva Insurance, AXA Insurance UK, Chubb European Group, Liberty Mutual Insurance Europe and Protector Insurance UK.

The early July court hearing will involve Arch Insurance UK, Argenta Syndicate Management, Ecclesiastical Insurance Office, Hiscox Insurance Company, MS Amlin Underwriting, QBE UK, Royal & Sun Alliance Insurance and Zurich Insurance.

Christopher Woolard, interim chief executive at the FCA said: "The court action we are taking is aimed at providing clarity and certainty for everyone involved in these BI disputes, policyholder and insurer alike. 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. 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."

Responding to the FCA announcement, speciality insurer Hiscox said that it is "committed to seeking expedited resolution of any contract dispute" and insisted that it is "actively settling claims" for event cancellation and abandonment, media and entertainment and other segments including travel.

"Hiscox has agreed to assist the FCA by participating alongside other insurers in the test case in order to provide certainty for businesses and brokers on the application of policies as quickly as possible," the company said in a statement.

Zurich said that based on its own review of wordings and legal opinion received from external counsel, the company believes that the Zurich UK wordings do not provide cover for business interruption in relation to the COVID-19 outbreak.

Tulsi Naidu, CEO Zurich UK, said: “This review tests a wide range of standard industry scenarios common to many insurers across the market. We agreed to assist in this process when we were asked by the FCA in relation to our versions of a standard industry wording. Ultimately, the entire industry will benefit from the legal analysis of a small number of test cases. Our ethos is about paying claims and we believe this action will reduce ambiguity and restore confidence in the industry."

Naidu added: “We note that the FCA is clear in its statement that it does not expect all wordings to respond and that policyholders should not expect that the inclusion of a wording implies that their policy will be responsive. Where our policies do cover losses related to the outbreak, we are paying claims as quickly as we can. Based on our own review of wordings and the advice from external legal counsel, we remain confident in our interpretation of our policy wordings. To date, we have received limited claims in relation to the policies being tested by the FCA.”

MS Amlin Underwriting, the Lloyd’s re/insurer, said it will "support the FCA’s move to collaborate with the industry and progress with the test case to lift the deadlock and uncertainty surrounding the payment of BI claims under these unique circumstances.”

Lloyd’s Managing Agency Argenta Syndicate Management (ASML) has also expressed support and agreed to participate in the proposed legal test case.

The FCA expects to publish a list of all the relevant insurers and policies that may have impacted wordings in early July.

"Policyholders should not assume that simple inclusion of their policy wording in this case will mean their policies are responsive. We are seeking a judgment that will help policyholders and insurers have a much clearer view of which business interruption policies respond to the pandemic, and those that don’t. Therefore, the court may well decide a number of these policies respond to the pandemic and others do not," the FCA said in a statement.