The Financial Sector Conduct Authority's pronouncement that insurers cannot use the lockdown to reject claims has thrown a new curve ball for the industry. Many big players who have not paid out business interruption claims argue that the lockdown is national government-imposed restriction on the entire country, and their underwriting models never factored in that risk when these products were designed.
Avior Capital Markets' head of research, Warwick Bam, said the biggest problem was that insurers were not pricing the policy or reserving for the risk of a lockdown scenario, nor was the regulator monitoring the solvency of insurers for such an event. If they are forced to pay up, he said the financial stability of short-term insurers will potentially be under threat.
FSCA's stance in line with that of other regulators