In a move that is sure to capture the attention of insurers internationally, the UK’s leading financial services watchdog has issued a strong warning to insurers following the Supreme Court’s landmark business interruption ruling earlier this month: pay up or face enforcement.
Britain’s Financial Conduct Authority (FCA) said on Friday (January 22) that insurers must pay valid business insurance claims as soon as possible.
This follows a unanimous dismissal by the Supreme Court of an appeal brought forth by some of the world’s largest commercial insurers – including Arch Insurance (UK) Ltd, Argenta Syndicate Management Ltd, Hiscox Insurance Company Ltd, MS Amlin Underwriting Ltd, QBE UK Limited and Royal & Sun Alliance Insurance Plc (RSA) - who argued that business interruption policies should not cover widespread disruption triggered by government efforts to curb the coronavirus.
The Supreme Court ruled in favor of the policyholders, stating that the vast majority of policyholders with non-property damage business interruption cover can make valid claims for their business interruption losses caused by the national response of the UK Government to COVID-19.
Now, the FCA is pressurizing insurers to react. According to a Reuters report, the FCA’s executive director for consumers and competition Sheldon Mills said in a letter to insurers’ chief executives on Friday: “Where we see that insurers are not meeting the expectations set out here, we will use the full range of our regulatory tools and powers to ensure they do so.”
Mills also said the watchdog will regularly request data from insurers on their progress in handling COVID-related business interruption claims, and on how many have been settled. He said the FCA intends to publish some of this data in the future.
The Supreme Court’s ruling has impacted a huge number of policyholders and insurers, and the status and value of many business interruption claims will have changed. According to Reuters, Mills wrote: “We expect you to be clear on these points and on your next steps as you write to all your policyholders with affected claims or complaints over the coming week.”