Insurers including Lloyd’s of London member Hiscox have come under fire from businesses for not paying out following lockdowns
Lloyd’s of London, which operates Europe’s most important insurance market, is collating details of insurers’ business interruption coverage for the UK’s Prudential Regulation Authority and is in discussions about a government backstop to cover future pandemics, it said in a letter seen by Reuters.
The organisation asked its members to provide data for the regulator by April 24, it said in a ‘Dear CEO’ letter sent to members on Friday.
Lloyd’s also said it was talking to the UK finance ministry, regulators and business partners about a ‘Pandemic Re’ government backstop and would publish preliminary estimates of the impact of Covid-19 on its members in early May.
Insurers including Lloyd’s of London member Hiscox have come under fire from businesses for not paying out following lockdowns around the world.
In Ireland, the refusal of insurers including FBD to pay out on business interruption policies to companies hit by Covid-19 has angered small company owners, notably including publicans and retailers forced to shut by Government. Business owners say they had cover in place to insure against losses stemming from an outbreak of infectious disease, and are eyeing legal action.
In a note on how the issue affects insurers, especially stock market listed FBD, analysts at Davy Stockbrokers said scrutiny is set to remain elevated over the industry’s exposure to business interruption claims.
According to Davy, the Central Bank has acknowledged that there is only ambiguity in a minority of such policies regarding whether or not a shutdown caused by Covid-19 is covered, while a worst-case analysis by the insurance industry underpins its resistance. The Central Bank has said that where there is ambiguity, an insurer is obliged to find for the customer.
FBD remains of the view that its policies do not cover for pandemics, Davy noted.
On Friday last week, Minister for Finance Paschal Donohoe said he was concerned some insurance firms had adopted a “blanket” rejection of business interruption claims. He said some insurers were not treating customers fairly, without saying which firms he believed to be at fault.
The minister said the wider insurance sector risked significant reputational damage as a result of its handling of Covid-19 claims and cases. He made the comments in a statement issued after the Finance Minister held a teleconference call with industry group Insurance Ireland on Friday.
Some insurers were “not treating customers fairly”, the minister said. Insurers and other regulated entities are obliged to act fairly to customers as a condition of being allowed to operate.
On Friday’s call with Insurance Ireland, the minister emphasised his concerns regarding the response of insurers to the Covid-19 crisis, and what he said was the need for them to play their part in the recovery phase, while ensuring a sufficient focus on the cost and supply of insurance, the Department of Finance said.
After the same call, Insurance Ireland CEO Moyagh Murdock said for business interruption cover, most policy wording is clear, but where there is a doubt about the meaning of a term, “insurers are committed, where appropriate, to giving the benefit of the doubt to the customer”.
It is important to note, however, that each policy is different and there may well be other factors which lead to the adjudication of whether a claim is valid or not, she said.
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