AM Best Information Services

SEPTEMBER 15, 2020 01:17 PM (EDT)

Best’s Commentary: UK COVID-19 Business Interruption Court Ruling Brings Greater Clarity but Questions Remain

 William Keen-Tomlinson
Senior Financial Analyst
+44 20 7397 4395

Catherine Thomas, CFA
Senior Director, Analytics
+44 20 7397 0281
Richard Banks
Director, Industry Research – EMEA
+44 20 7397 0322

Edem Kuenyehia
Director, Market Development &
+44 20 7397 0280


LONDON - SEPTEMBER 15, 2020 01:17 PM (EDT)
Following the English High Court’s judgment in the Financial Conduct Authority’s (FCA) business interruption (BI) insurance test case, AM Best expects COVID-19-related BI claims to have a material impact on U.K. commercial property insurers’ 2020 earnings. However, the aggregate solvency of the U.K. non-life insurance sector should remain robust.

In a new Best’s Commentary, “UK COVID-19 Business Interruption Court Ruling Brings Greater Clarity but Questions Remain,” AM Best explains some uncertainty remains around the volume and severity of valid claims. Either side may appeal the court’s decision, subject to procedural rules; additionally, the test case does not directly address how resulting claims payments will be calculated.

AM Best estimates that commercial property premiums account for approximately GBP 7.5 billion of the GBP 50 billion gross premiums written by U.K.-domiciled non-life insurers, and that approximately 10% of commercial property premiums relate to business interruption extensions. The FCA estimates that 370,000 policies will be affected by the test case judgment.

In AM Best’s view, the judgment provides policyholders with increased clarity as to whether they will receive payment from their insurers (a process that may otherwise have been lengthy and more costly). Insurers now have a better understanding of which of their policies are expected to respond to COVID-19-related BI claims. Given the representative nature of the policies and wordings selected by the FCA, the judgment also provides guidance for the interpretation of BI policies outside the sample used in the test case.

To access the full copy of the commentary, please visit .

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.