RSA Insurance Group PLC (LON:RSA) today welcomed the statement today from the FCA regarding their court proceedings in relation to business interruption insurance, first announced on 1 May. The FCA intends to obtain court judgements, using the Financial Markets Test Case Scheme, on contractual interpretation of certain business interruption insurance policies in the UK market, bringing clarity for both customers and the industry.
RSA provided an update on the impacts of COVID-19 in its Q1 trading update on 7 May. The update reported that as at the end of April the Group had received valid claims across travel, wedding cancellation (UK only) and commercial lines business interruption and related policies with an estimated cost of c.£25m net of reinsurance. This estimated cost has not changed materially since then.
The FCA confirmed today that they have selected a representative sample of 17 policy wordings to include within the court case as well as publishing a list of 16 insurers who underwrite these wordings. In this context the FCA has invited a subset of 8 insurers to assist with the court case, with RSA’s participation being in relation to 3 of the schemes referenced.
The FCA has made clear in their statement that in selecting policy wordings and insurers for the court case they have sought breadth of coverage across the key arguable issues, whilst minimising the number of parties engaged before the court. Market share has not been a determining factor in selection, and RSA’s inclusion is not representative of its market share on the relevant policy wordings. The FCA expects the outcome of the court proceedings and related rulings to be directly relevant for all insurers providing business interruption insurance in the UK.
As referenced by the FCA in earlier announcements, it remains the case that the great majority of business interruption claims are not expected to be eligible under their coverage terms for COVID-19, and the court proceedings seek to address the legal interpretation of just a small minority of policies and schemes. RSA continues to treat claims in line with legal advice, precedent and case law.
RSA Insurance Group has a comprehensive reinsurance programme, with core catastrophe covers in place across the Group (including the UK) as well as a group-wide aggregate protection. These arrangements (described in the Group’s full year results) are expected to provide substantial protection in the event that downside claims scenarios were to arise.