Hiscox notes the judgment of the Supreme Court (the “Judgment”) delivered on Friday 15 January 2021, in the appeal of the UK insurance industry test case on the contractual interpretation of business interruption wordings in certain UK property insurance policies (the “Industry Test Case”).

Key points:

  • Hiscox welcomes the clarity of final Judgment; claims settlement process has begun
  • The outcome of the Supreme Court’s Judgment confirms that fewer than one third of Hiscox’s 34,000 UK Business Interruption policies may respond
  • Hiscox Group 2020 COVID-19 estimate for business interruption increased by $48 million net of reinsurance  
  • Hiscox’s capital position remains strong and the Group maintains an “A” rating for financial strength from S&P.

In order to achieve clarity for customers on the application of relevant policies as quickly as possible, Hiscox agreed in May 2020 to assist the Financial Conduct Authority (“FCA”) by participating in the Industry Test Case alongside seven other insurers. Following the ruling handed down by the High Court in September 2020, permission to appeal to the Supreme Court was granted to the FCA, a policyholder group and six insurers, including Hiscox.

The Judgment handed down today comprises more than 100 pages of legal analysis by the Supreme Court addressing important points of insurance law and setting new precedent for over 50 insurers and almost 400,000 policyholders. The Supreme Court largely confirms the outcome of the High Court’s ruling that, except in rare circumstances, cover is restricted to Hiscox policyholders who were mandatorily closed. Fewer than one third of Hiscox’s 34,000 UK Business Interruption policies may respond as a result.

The Judgment represents the final outcome of the Industry Test Case, and there can be no further appeals. Hiscox welcomes the clarity that the Judgment provides and the processing of claims has begun.

As a result of the Judgment as well as further government restrictions announced during 2020, the total Hiscox Group 2020 COVID-19 estimate for business interruption increased by $48 million net of reinsurance. In addition the previously disclosed additional loss estimate of up to $40 million for event cancellation if government restrictions continued into 2021, will now be recognised in our 2020 financial result due to the expectation that covered events will be cancelled.

As previously stated, Hiscox’s exposure to potential business interruption claims arising from further UK government restrictions to contain the spread of COVID-19 has been running off at approximately 8% per month from June 2020, with residual exposure to be fully run off by the end of June 2021. Following the Judgment, the Group estimates exposure to restrictions already announced in 2021 at less than $20 million if restrictions extend to the end of March.

The Group remains focused on supporting its customers and employees through this challenging period. It continues to deploy capital for growth in an improving market. Hiscox’s capital position remains strong and the Group maintains an “A” rating for financial strength from S&P. The Group will provide a comprehensive update of its performance in its preliminary results announcement on 3 March 2021.

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