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COVID-19: FSCA’s latest stance on Business Interruption insurance cover

27 July 2020
– 2 Minute Read


The Financial Sector Conduct Authority (FSCA) released a press release on 24 July 2020 (Press Release) setting out its latest stance on Business Interruption (BI) insurance cover.

Together, the FSCA and the Prudential Authority (PA) (the Authorities) have had discussions with various non-life insurers, in order to address:

  • the impact of the repudiation of contingency BI cover claims by some non-life insurers (and delays in processing policyholders’ claims); and
  • the impact of this matter on the reputation of the non-life insurance industry.

As a result of the discussions, the Authorities reached an understanding with those non-life insurers that are most affected by BI cover claims. In terms of the understanding, the non-life insurers will consider providing interim relief to their policyholders who have the appropriate contagious disease extensions in their policies, while legal certainty on this matter is being sought from the courts.

The FSCA acknowledges in the Press Release that it will take some time for legal certainty to be achieved, and in the interim, relief payments should be made.

The Authorities have set out guiding principles to be applied when determining the interim relief:

  • The interim relief should focus on those businesses most impacted by lockdown (for example, the hospitality industry) and also on small businesses;
  • The funds provided to a policyholder as interim relief shall not be claimed back by any non-life insurer should the courts decide in favour of insurers. If, however, the courts find in favour of policyholders, the funds will be deducted from the total claim amount payable to a policyholder by a non-life insurer; and
  • The relief should be on either an interim basis pending legal certainty, or if non-life insurers wish to offer a full and final settlement, such settlement should reflect reasonable value to a policyholder and the implications thereof should be clearly explained in writing should a policyholder wish to accept the settlement on this basis.

The Press Release ends with the Authorities expressing their gratitude to the insurers providing interim relief to their policyholders with no intention of claiming the funds back from their policyholders.

The press release can be accessed here.