Insurance Jottings
Biggest Uncertainty for UK Insurers Remains Around Business Interruption Claims: BoE
The biggest uncertainty now facing insurers is whether they will have to pay for a raft of business interruption claims, the Bank of England said, as a court prepares to rule on whether existing policies cover big losses caused by the coronavirus crisis.
Anna Sweeney, the BoE’s executive director for insurance, said the sector has remained robust in the face of the COVID-19 pandemic’s impact on assets they hold and on liabilities.
“The highest level of uncertainty remains around business interruption,” she told a City & Financial online event.
Britain’s Financial Conduct Authority goes to court this month to clarify whether an array of
wordings in business interruption insurance policies back claims for compensation for disruptions caused by pandemic lockdowns.
“A number of insurers are taking steps to make sure there is no ambiguity about who is and isn’t covered for a second wave,” Ms Sweeney said.
Hiscox is among eight insurers whose policy wordings will come under scrutiny by the courts this month, although the trial could still go to an appeal.
“We would expect both sides to abide by the outcome,” Hiscox Chief Executive Bronek Masojada said.
Lloyd’s Chairman Bruce Carnegie-Brown said insurers should consider whether their products were correctly labelled and said brokers had a responsibility to provide clear advice on what is covered.
Association of British Insurers Director General Huw Evans said the industry would be undertaking a “wholesale review of wordings” as a result of the disputes.
Businesses have been struggling to get pandemic cover, with Lloyd’s calling for state-backed policies for pandemics and other systemic risks.
Reinsurers have said they will exclude communicable disease cover from all policies from the 1st January Mr Masojada said.
Asked if insurers should bolster capital buffers, Ms Sweeney said her “personal instinct” was that the emphasis should be on being clear on what liabilities were covered and managing those risks.
Downstream energy rates up 35%+ in last 9 months
Downstream energy insurance rates remain on their upwards trajectory with underwriters imposing increases of 35 to 40 percent in the last nine months, according to broker Marsh JLT Specialty.
MGAA pushes for return to face-to-face operations
The large majority of Managing General Agents expect a return to face-to-face client and broker meetings post-Covid-19 with almost 60 percent of MGA’s reporting a negative financial impact from the pandemic.
Lloyd’s pushes back on LOCs in major capital reform
In an overhaul of its reliance on banks’ letters of credit (LOCs) for its own regulatory capital, Lloyd’s will no longer accept security from seven financial institutions including Deutsche Bank, Commerzbank and Clydesdale Bank while separately capping its aggregate exposures to other banks.
Insurers call on EU to ease capital and investment rules
European insurers have urged the European Commission to make “focussed improvements” to the Solvency II regime to increase their investment capacity and support greater equity allocations within portfolios.
Lloyd’s proposes three solutions to fast-track pandemic recovery
Lloyd’s has suggested three ways that the insurance industry could fast-track global economic and societal recovery from Covid-19, two of which require government and (re)insurance industry partnerships.