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Hiscox Ltd response to Insurance Industry Test Case Judgment

  • Published by:

  • Topics:
    • Claims & Losses
    • Covid-19 (Coronavirus)
    • Law
    • Regulation & Compliance
    • Supply Chain / Business Interruption

Hiscox Ltd notes the judgment (the "Judgment") delivered by the High Court of England and Wales in the UK insurance industry test case...

...brought by the Financial Conduct Authority (the "FCA") on the contractual interpretation of business interruption wording in certain UK property insurance policies (the "Industry Test Case").

In order to achieve clarity for customers on the application of relevant policies, Hiscox agreed in May to assist the FCA by participating in the Industry Test Case alongside seven other insurers.

The Judgment comprises more than 160 pages of legal analysis by the Court addressing important points of insurance law for the industry and customers. The Judgment clarifies that fewer than one third of Hiscox's 34,000 UK business interruption policies may respond.  Coverage under these policies is essentially limited to those customers who were mandatorily closed by Government orders, and then only in certain circumstances.

Hiscox is assessing the Judgment in detail to ascertain how the Court's conclusions should be applied to the claims and circumstances of individual Hiscox policyholders. Any issues not addressed by the Judgment will be assessed on a case-by-case basis as part of the normal insurance loss adjustment process for claims.

As a result of the Judgment, the Group estimates additional COVID-19 claims arising from business interruption to be less than £100 million net of reinsurance. This encompasses claims from all divisions including Hiscox Re and is a reduction of £150 million from the upper end of the Group's previously published risk scenario. 

All parties involved now have an opportunity to apply to the Court for permission to appeal some or all of the Judgment to a higher court. The parties may also ask that any appeal proceed directly to the Supreme Court, rather than to the Court of Appeal first, in order to expedite the appeal process. It is expected that a ruling on any such application would be made in October. The outcome of any appeal could impact loss estimates.

Hiscox recognises these are extremely difficult times for businesses and regrets any contract dispute with customers, which is why it is committed to seeking an expedited resolution through this Industry Test Case. In line with FCA Guidance, Hiscox will communicate an update on the Industry Test Case to relevant policyholders through the appropriate channels.

The Group has delivered a resilient performance in the third quarter so far, as trading conditions continue to improve in every segment. In July and August, the Group grew its gross written premiums by 19% compared to the same period last year. Over this period Hiscox Retail achieved growth in both revenues and customer numbers, with premiums up 7%, including 6% for Hiscox UK. Hiscox London Market has continued to benefit from strong rate improvement in the majority of classes, growing 19% in the two-month period, and Hiscox Re & ILS experienced accelerated rate momentum and double-digit premium growth at the July renewals.

The Group remains focused on supporting its customers and employees through this challenging period. There is no change to any of the estimates or guidance provided in company's interim results published on 3 August. Hiscox's capital position remains strong and the Group maintains an A rating for financial strength from S&P. The Group is deploying capital for growth in an improving market and will provide a more detailed update of its performance in its trading statement scheduled for Monday 2 November.