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COVID-19: FSCA stance on Business Interruption insurance cover

10 July 2020
– 3 Minute Read


On 9 July 2020, the Financial Sector Conduct Authority (FSCA) issued a press release on its stance regarding the behaviour of insurers who are deliberately repudiating Business Interruption (BI) claims where no grounds exist to do so.

The FSCA reiterated that the National Lockdown implemented in terms of the Regulations under the Disaster Management Act, 2002, as a response to the COVID-19 pandemic (National Lockdown), cannot be used by any insurer as a ground to reject a claim. An attempt to do so goes against the Treating Customers Fairly Principles and it breaks down trust and confidence in the insurance sector.

The FSCA warned that it will take action against insurers that do not treat customers fairly. Although the FSCA released Communication 34 of 2020 (Communication 34) which formalised its concern and focused on specific aspects of BI, the FSCA has nevertheless received complaints on insurers repudiating or delaying BI claims.

In Communication 34, the FSCA identified six categories of BI insurance policies, based on the policy wording, and sets out its position on whether a valid claim exists in terms of those categories, as follows:

  • Radius and Notification: valid claim
  • Radius: valid claim
  • Notifiable Disease: valid claim
  • General Exclusion: invalid claim
  • Closure or Restriction: invalid claim
  • Closure by Order: invalid claim

Based on the information that the FSCA has received and analysed to date, it has found that policyholders are able to claim where they have demonstrated they have satisfied the requirements of their specific policies, whether the claim arose before, during or after the National Lockdown.

The FSCA provided an example of a claim where the BI policy has a radius clause. If the policyholder can prove that it suffered a loss as a result of contagious/ infectious disease in the area specified in the radius clause, and its business was interrupted or interfered with as a result of measures taken as a consequence of that contagious/ infectious disease, including the National Lockdown, then the policyholder has a valid claim.

Insurers are engaging with the FSCA and the FSCA advised that it may issue specific directives to any insurer which is seen to be non-compliant.

The FSCA pointed out that it is aware of the Café Chameleon v Guardrisk judgment and that the judgment is in line with Communication 34. The FSCA continues to engage with the insurance industry in the interests of all affected policyholders.

The press release can be accessed here, Communication 34 can be accessed here and our newsflash on the Café Chameleon v Guardrisk judgment can be accessed here.