The Financial Conduct Authority (FCA), which regulates insurance companies in the United Kingdom, has stated that it does not believe that COVID-19 related losses trigger most insurance policies, as such policies usually require a direct link between financial loss and physical damage to the insured. property.
Think of fire, flood, wind or earthquake damage.
The FCA is now conducting a test case involving eight insurance companies that do not claim property damage to trigger coverage ( Hear a three-minute explanation from the Centers for Better Insurance).
Is this case relevant to US real estate / non-life insurance companies? It depends on who you ask.
The FCA looks at 1
Senior executives from special insurance and reinsurance guarantor Hiscox Group warned that the FCA's possible results could drive further COVID-19 losses to its reinsurance book, . Artemis reports .
Tom Baker – an expert in insurance law and policy at the University of Pennsylvania – called the British case a " one-way block " for American insurance companies.
"If carriers lose or stop having a lot of coverage, it will be bad for them here" in the United States, Baker said. “I think if the carriers win, the insurance [in the U.K.] is really different. They tend to be called risk, rather than risk. I think it will be easy to separate them.
Jason Schupp, founder and executive member of the Centers for Better Insurance, does not agree that a negative ruling for UK insurance companies will have a major impact on its US counterparts.
"In Europe, [FCA] permits to provide miscellaneous financial loss insurance allow an insurance company to take out insurance interruption insurance that does not require proof of property damage" to pay a claim, Schupp says. Although Britain is no longer part of the European Union, Schupp says: “U.K. the law in fact recognizes the financial loss class of the insurance class.
What does this mean for coverage of pandemic outages in the United States? According to Schupp
it is not much. "The outcome of the British litigation will probably not be relevant to the dozens – or perhaps hundreds – of lawsuits about business interruptions that are making their way through US courts, where the issue of property damage is first and foremost, says Schupp.
He continues to say that proposals coming out of Europe or the UK for future pandemic insurance – such as a Lloyd's framework – are considering non-proprietary non-proprietary insurance solutions. These proposals do not appear to be compatible with the current US insurance system. "
A decision by the FCA is expected Last mid-September the regulator said that although the case does not address how any resulting claims would be calculated, "We can intervene and take further action where companies do not appear to meet our expectations and treat their customers fairly. "