Australia’s multibillion-dollar insurance sector is quietly assessing its risks after a test case run by the Financial Conduct Authority in the UK reached a verdict largely in favour of business interruption insurance policies being paid out for losses arising from the pandemic.

The High Court judgment, which tested 21 different types of policy wordings issued by eight insurers including QBE, prompted some insurance insiders to estimate it could end up costing insurers in Australia more than $1 billion if enough businesses start challenging their policies and precedents are set.