Airmic welcomes UK Supreme Court decision to uphold FCA business interruption ruling
John Ludlow, Airmic’s chief executive, has called the UK Supreme Court’s ruling on the Financial Conduct Authority's business interruption insurance case for COVID-19 claims “one of the most important legal issues of the last decade.”
The Supreme Court’s decision on January 15, 2021, means UK insurers must pay out billions in business interruption claims triggered by the COVID-19 pandemic.
The Court found in favour of small firms receiving payments from business interruption insurance policies, upholding a judgement made by the UK High Court in September 2020 in a test case on this issue.
Ludlow said: “Affected policyholders will welcome the ruling to unanimously dismiss insurers’ appeals and to substantially allow all four of the FCA’s appeals in favour of policyholders.”
Julia Graham, Airmic’s deputy chief executive and technical director, described it as “positive news for hundreds of thousands of commercial insurance buyers across the UK.”
She said: “To provide some scale to the significance of this morning’s Supreme Court ruling, the FCA has estimated that some 370,000 policyholders would be affected by today’s Supreme Court decision, paving the way for up to £1.2bn in BI claims payments, across 700 policy types, from 60 insurers.”
Ludlow added: “Many of the insurance buyers affected by the FCA’s business interruption case are long-term insurance partners; now that many more of these BI claims are to be paid, it will be to the benefit of enduring relationships between carriers and their policyholders, which in many cases were already strained not just by this case but by recent market conditions. Today’s news should be viewed within that broader context.”
However, Dominic Simpson, a vice president at Moody’s Investors Service in London, said the judgement is credit negative for UK re/insurers. “The financial impact of the judgment on individual insurers should be manageable, net of reinsurance,” he said. “However, precedents have been set which could widen the circumstances in which policyholders make future claims.”