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Reports on recent UK and EU regulatory developments of interest to insurers and their intermediaries. See also our Financial institutions general regulatory news in the Related Materials links.
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Part VII insurance business transfers: FCA GC21/3 on proposed changes to its approach
Solvency II: EIOPA supervisory statement on SCR breach
Solvency II: EIOPA opinion on use of risk mitigation techniques by (re)insurers
Solvency II: EIOPA consults on revision of guidelines on contract boundaries and on valuation of technical provisions
Nat Cat insurance protection gap: EIOPA feedback statement on pilot dashboard
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Since the novel coronavirus landed in America, the insurance industry has worked hard to create the impression that there is no coverage for business interruption losses resulting from the pandemic. For the most part, insurers have discussed the “intent” of the policies and avoided specific policy analysis. The insurer disinformation effort recently started including citations to lists of court decisions obtained to date as if insurance coverage should be decided not on the terms of the contracts at issue but instead on the basis of an early win/loss record. A review of court statistics, along with two recent court decisions, expose the fallacy of the insurers’ argument.
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A January 15, 2021, decision from the UK’s highest court spells good news for English policyholders. In
The Financial Conduct Authority v. Arch Insurance (UK) Ltd., and others, UKSC 2020/0177, the Court held that 21 insurance policies sold by eight leading business interruption insurers provide coverage for losses resulting from COVID-19 and resulting public health measures taken by UK authorities. Approximately 700 types of policies across over 60 insurers and 370,000 policyholders could potentially be affected by the outcome of the Supreme Court’s rulings.
The Court interpreted the following four types of clauses in the relevant policies:
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Recent regulatory developments of interest to insurers and their intermediaries. See also our General regulatory news in the Related Materials links.
Contents
How competitive are UK insurance markets? Bank Underground article
TCFD recommendations: UNEP FI pilot report and guidance for insurers
COVID-19: Supreme Court judgment in FCA s BI insurance test case
On 15 January 2021, the Supreme Court handed down judgment in FCA v Arch Insurance (UK) Ltd and others [2021] UKSC 1 on the issues on appeal from the High Court in the test case brought by the FCA seeking legal clarity on the meaning and effect of certain non-damage business interruption (BI) insurance policy wordings. The FCA has published a press release and updated its dedicated webpage on the test case to summarise the key aspects of the judgment and outline the next steps.
15 January 2021
Insurance – Business interruption insurance – COVID-19
The Financial Conduct Authority (FCA) commenced the present test case under the Financial Markets Test Case Scheme (the scheme) for the benefit of insurance policyholders, who held insurance policies which covered them against losses arising from interruption of business, to urgently clarify whether or not there was cover in principle under a variety of different standard insurance policies for COVID-19 related business losses. The defendants were eight insurers who were leading providers of ‘business interruption’ insurance. The aim of the proceedings was to achieve the maximum clarity possible for the maximum number of policyholders and their insurers by considering a representative sample of standard form business interruption policies. The proper interpretation of four types of clauses in particular were considered, namely; (i) ‘disease clauses’; (ii) ‘prevention of access clauses’; (iii) ‘