Hiscox increases COVID-19 BI loss estimate following UK Supreme Court ruling
Hiscox Group’s 2020 COVID-19 estimate for business interruption (BI) has increased by $48 million, following the UK Supreme Court’s final judgement in the appeal of the UK insurance industry test case on BI wordings in UK property insurance policies.
Hiscox welcomed the clarity of the Supreme Court’s decision, which largely confirmed the outcome of the High Court's ruling in September 2020. The ruling states that, except in rare circumstances, cover is restricted to Hiscox policyholders who were mandatorily closed.
It means fewer than one third of Hiscox’s 34,000 UK BI policies must pay out.
The Supreme Court decision was final and Hiscox confirmed the claims settlement process for these policies has now begun.
Hiscox said the previously disclosed additional loss estimate of up to $40 million for event cancellation if government restrictions continued into 2021 will now be recognised in its 2020 financial result, with covered events expected to be cancelled.
Hiscox reiterated that its exposure to potential BI claims arising from further UK government restrictions to contain the spread of COVID-19 has been running off at approximately 8 percent per month from June 2020. Residual exposure is expected to be fully run off by the end of June 2021.
Following the judgment, Hiscox estimated exposure to restrictions already announced in 2021 at less than $20 million if restrictions extend to the end of March. The re/insurer insisted its capital position remains strong.
Hiscox agreed to assist the Financial Conduct Authority (FCA) by participating in the industry test case in May 2020, alongside seven other insurers.