Zurich UK update on FCA business interruption process
31 May 2020
- Zurich welcomes the UK Financial Conduct Authority (FCA) actions aimed at bringing clarity to policyholders and insurers on coverage issues relating to business interruption stemming from the COVID-19 outbreak.
- To date, the Group has received limited claims in relation to the policies to be tested by the FCA, and based on received legal opinion remains confident in its interpretation of UK policy wordings.
- Throughout the current crisis, Zurich has provided a wide range of support and relief to customers including the prompt payment of claims where coverage exists, resulting in a limited level of disputes over coverage.
Zurich Insurance Group has welcomed today’s announcement by the UK’s Financial Conduct Authority to test policy wordings from across the UK insurance industry in the UK High Court, with the aim of bringing clarity to policyholders and insurers over coverage issues relating to business interruption stemming from the unprecedented outbreak of the COVID-19 virus.
The FCA said its selection of a representative sample of wordings from across the UK industry is intended to clarify which business interruption policies respond to the pandemic and which do not. The Zurich UK wordings put forward by the FCA represent Zurich’s version of standard industry provisions which are not designed to provide cover for pandemics such as COVID-19. Based on the Group’s own review of wordings and legal opinion received from external counsel, Zurich believes that the Zurich UK wordings do not provide cover for business interruption in relation to the COVID-19 outbreak. This view is further supported by the limited numbers of claims received to date by Zurich’s UK business in relation to business interruption, and the very low level of disputes over coverage experienced by the Group.
The full Zurich statement can be found here (new window)
In the unlikely event that the UK High Court were to judge that all industry wordings reviewed in the FCA process do provide cover for business interruption in relation to COVID-19, then Zurich estimates that this would result in approximately US$200 million of claims net of reinsurance in addition to the scenario for full-year 2020 claims related to COVID-19 presented on May 14. This amount includes an assessment of the potential impact to all Zurich UK business, not limited to SME. The continuing nature of the event means that this is subject to significant uncertainty.
Tulsi Naidu, CEO Zurich in the UK commented, “This review tests a wide range of standard industry scenarios common to many insurers across the market. We agreed to assist in this process when we were asked by the FCA in relation to our versions of a standard industry wording. Ultimately, the entire industry will benefit from the legal analysis of a small number of test cases. Our ethos is about paying claims and we believe this action will reduce ambiguity and restore confidence in the industry.
“We note that the FCA is clear in its statement that it does not expect all wordings to respond and that policyholders should not expect that the inclusion of a wording implies that their policy will be responsive. Where our policies do cover losses related to the outbreak, we are paying claims as quickly as we can. Based on our own review of wordings and the advice from external legal counsel, we remain confident in our interpretation of our policy wordings. To date, we have received limited claims in relation to the policies being tested by the FCA.”