UK court rules in favour of the FCA in business interruption test case


Hiscox has responded to the judgment delivered by the High Court of England and Wales in the UK insurance industry test case.

The case was brought by the Financial Conduct Authority (FCA) on the contractual interpretation of business interruption wording in certain UK property insurance policies. The judgment included a number of different conclusions, but found in favour of the FCA on the majority of the key issues. 

These included in respect of coverage triggers under most disease and ‘hybrid’ clauses, certain denial of access/public authority clauses, and causation and ‘trends’ clauses, according to Herbert Smith Freehills which represented FCA in the case.

The judgement did not say that the eight defendant insurers, which included Hiscox, are liable across all of the 21 different types of policy wording in the representative sample considered by the court. Neither did it determine how much is payable under individual policies, though it does provide much of the basis for doing so.

Hiscox said the Judgment clarifies that fewer than one third of its 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.

Hiscox said it is assessing the judgment to ascertain how it should be applied to the claims and circumstances of individual Hiscox policyholders. “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,” it added. 

The re/insurer estimates additional COVID-19 claims arising from business interruption will be less than £100 million net of reinsurance. This encompasses claims from all divisions including Hiscox Re and is a reduction of £150 million from the upper end of its previously published risk scenario. 

The UK court’s decision is subject to appeal. 

Hiscox said it had agreed to assist the FCA by participating in the Industry Test Case alongside seven other insurers to achieve clarity for customers on the application of relevant policies. 

“The group remains focused on supporting its customers and employees through this challenging period,” Hiscox said. “There is no change to any of the estimates or guidance provided in company's interim results published on August 3. Hiscox's capital position remains strong.” 


Hiscox, Financial Conduct Authority, Business interruption

Bermuda Re