FCA publishes final guidance for BI Covid claims

The Financial Conduct Authority (FCA) has released a guidance paper aimed at business interruption (BI) insurance policyholders in the wake of the regulator’s test case outcome handed down by the Supreme Court in January.

“Final guidance: Business interruption insurance test case - proving the presence of coronavirus (Covid-19)” sets out the types of evidence and methodologies for policyholders to use when proving the presence of the virus in a particular area around their premises.

This guidance aims to help BI policyholders in the claims process when policy wordings require the policyholder to prove the presence of a disease within a particular area before the policy will respond.

The document is designed to provide clarity for all parties involved in BI insurance, the regulator noted, primarily for policyholders, but also intermediaries and insurers, including managing agents at Lloyd’s.

The document was put together after a consultation period and follows the FCA’s release on 29 January of a “Policy Checker” document designed, since the regulator’s test case win, to identify whether a policy would cover a Covid-19 BI claim, as well as a document answering policyholders’ “Frequently Asked Questions” published at the same time.

“The FCA has stepped up and done a great job on this, doing everything they said they would when they would,” says Julia Graham, deputy CEO and technical director of Airmic.

“Communication has been timely and made as simple as possible for policyholders to enable valid claim payments to be made as early as possible, with the website consistently updated. The supervisor has provided an extremely helpful service to policyholders.”

What’s next?

The FCA will shortly publish a Covid-19 Calculator to assist policyholders to carry out the calculations in Chapters 7, 8 and 9 of the final guidance – on reported cases of Covid-19, on estimated cases, and geographical distribution methodology, respectively.

“The results of the calculator can be used to evidence whether Covid-19 was likely to be present in the relevant policy area but it is open to policyholders to carry out the calculations themselves,” the FCA said.

“If you would like to use the calculator, please sign up for our BI test case email alerts and you will get an email when the calculator is launched. The guidance explains the steps that our calculator will take,” the regulator added.

The final guidance paper will cease to have effect on 31 January 2022, by which time the FCA said it expects that all issues relating to proving the presence of Covid-19 will have been resolved.