(Reuters) – Insurance companies including Hiscox, RSA and QBE will take part in a British test case to determine whether their policy will pay out millions of pounds to companies affected by the coronavirus pandemic, the industry regulator said on Monday.
A national shutdown has triggered insurance claims from companies in the UK seeking compensation for having to shut down their business as a result of the coronavirus crisis.
The Financial Conduct Authority (FCA) said last month that it would seek clarification from the courts whether the wording of certain insurance policies should provide protection during the pandemic.
On Monday, the FCA said it has selected 1
"We expect the test case to provide guidance for interpreting many other business insurance policies that are not in the representative sample," the FCA said.
The eight insurance companies that asked to participate in the lawsuit were Lloyds from the London insurance companies Hiscox, Arch, Argenta and MS Amlin, as well as RSA, QBE, Zurich and Ecclesiastical, the FCA said in a statement.
The insurance companies have entered into a framework agreement with the regulator that regulates the process and the schedule, it added.
Hiscox said it has agreed to help in the test case to give companies and brokers assurance about the application of policies as quickly as possible.
RSA said it expected its reinsurance program to provide most of the coverage for potential claims.
Arch, Argenta, Ecclesiastical, MS Amlin and Zurich said they supported the FCA's goal of seeking clarity, with Zurich adding that it had received a "limited" number of BI claims. QBE did not immediately respond to the request for comment.
The Hiscox Action Group of policyholders said it would proceed with its own plan of legal action against Hiscox, which it said could result in a resolution faster than the FCA case.
The FCA said it expects the High Court case to be heard in the second half of July and the last 5-10 days.
"In early July, we expect to publish a comprehensive list of other insurance companies and many other BI policies in the market that we expect the test case to impact, based on company filings," it said.
The court could decide that a number of policies respond to the pandemic and others did not, it said.
In the meantime, insurance companies may continue with any plans for voluntary settlement of cases, the FCA said.
FCA also asked all insurance companies to check their policy formulations against those it intends to test to see if theirs will be affected by the case results.
The watchdog also outlined what the FCA expects all insurers handling BI claims to say, in most cases, insurance companies are not required to pay out in connection with the pandemic.
More insurance and risk management news about the krone virus crisis here.