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FCA consultations


FCA Business Interruption Test Case

Lloyd’s welcomes the FCA’s test case judgment which will bring coverage clarity for many policyholders with certain non-damage business interruption insurance extensions. 

We will now take the time to carefully consider and respond to the implications of this complex judgment for our customers as well as its impact on the Lloyd’s market, which retains less than 2% of the overall UK property SME market. Our extremely strong capital position ensures that we are well prepared to respond to the financial implications of the High Court’s judgment, and importantly to support our impacted customers.

Lloyd’s expects to pay out £5bn in COVID-19 claims to its customers around the world across a wide range of policies, including event cancellation, property, casualty, and credit. The Corporation has also committed a £15m package of support for charitable organisations responding to the pandemic, together with £15m in seed capital investment to develop a Systemic Risk Centre of Excellence, which aims to better understand, model and provide insurance for systemic catastrophic events. We are also progressing at pace a number of solutions to support insurance industry and government partnerships to fast-track societal and economic recovery and build resilience to future systemic and black swan catastrophic events.

Find out more about the outcomes of the FCA’s Business Interruption test case on the FCA website.

Assessing product value

On 3 June, the FCA confirmed guidance for insurance firms to consider the impact of COVID-19 on the value of their insurance products. This includes the requirement for insurers to review their products to understand whether they are delivering their promised value and taking appropriate action in cases where it is not, within six months. This might include changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period. Again, we are very supportive of the FCA’s approach, which is already reflected in our existing minimum standards (in particular MS9), as well as the guidance we issued back in March. 

Product value and coronavirus: draft guidance for insurance firms

Following the FCA guidance published on 1 May, we responded to confirm that Lloyd’s is keen to work in collaboration with government and regulators to help market participants to navigate this unprecedented crisis in a way that assists customers in financial distress, but also supports economic recovery over the long-term.

We have confirmed our support for their ‘Part 8’ plan which aims to create certainty for customers on whether cover does or does not apply for business interruption claims where this is a ‘grey’ area under dispute. We also highlighted that the Lloyd’s market share of the UK property SME market is less than 2% and therefore we do not expect this to be a substantial issue for the Lloyd’s market.

We reinforced that the market is acting promptly to pay all valid claims and that our own complaints team is well resourced and able to cope with what will be an inevitable increase in complaints volume. We will of course keep the FCA updated on our response to this.

FS20/5: Coronavirus and customers in temporary financial difficulty: guidance for insurance and premium finance firms

We have responded to the FCA consultation on customers in financial difficulty. We welcome the draft guidance published by the FCA on product value in light of the exceptional circumstances arising from coronavirus (Covid-19) and support the principle that insurers should ensure that their products are providing value to customers and that this is especially important during.