QBE says cap will keep losses in Britain to $115m

Insurer QBE says losses stemming from pandemic-linked business interruption insurance in Britain will be capped at $115m.

QBE Insurance CEO Patrick Regan. Picture: Hollie Adams/The Australian

Insurer QBE says losses stemming from pandemic-linked business interruption insurance in Britain will be capped at $115m.

This follows British insurance regulator the Financial Conduct Authority building a test case to clarify disputed wording regarding business interruption insurance.

FCA interim chief executive Christopher Woolard said the case was part of a package of measures from the British regulator, but it was clear some insurers would have to pay.

“We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency. However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy,” Mr Woolard said.

“Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers. It is clear that decisive action is appropriate given the severity of the potential consequences for customers.”

British insurer Aviva said it expected COVID-19 claims for travel, commercial and business interruption insurance would cost £160m ($300m).

However, QBE and many other insurers operating in Australia do not cover business interruption claims arising from COVID-19. A small number of Australian businesses do have pandemic cover built into their business interruption insurance.

APRA advised insurers to conduct stress testing around pandemics after the SARS scare, which saw exclusions put into place.

A spokesman for the Insurance Council of Australia said the industry had an eye on developments in Britain and other markets but did not expect there to be a rush of claims in Australia.

“Most current (business interruption) policies contain exclusions where the intent is to rule out losses caused by notifiable quarantinable or infectious diseases,” the ICA spokesman said.