Insurance regulatory news, September 2020 # 3

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Recent regulatory developments of interest to insurers and their intermediaries. See also our General regulatory news in the Related Materials links.

Contents

  • COVID-19: Judgment in FCA's business interruption insurance test case
  • COVID:19: FCA comments on pandemic exclusions in PII for general insurance and mortgage intermediaries

COVID-19: Judgment in FCA's business interruption insurance test case

The High Court has handed down judgment in FCA v Arch Insurance (UK) Ltd and others [2020] EWHC 2448 (Comm) (15 September 2020), the test case brought by the UK Financial Conduct Authority (FCA) seeking legal clarity on the meaning and effect of certain non-damage business interruption (BI) insurance policy wordings.

The judgment is complex, addressing cover for COVID-19 related claims under 21 individual policy wordings. We take a look at the implications for policyholders and insurers in our separate briefing: Analysis: the FCA Business Interruption Test Case ruling.

The FCA has published a press release and updated its webpage on the test case to summarise the key aspects of the judgment and outline the next steps. The FCA states that a hearing will shortly be fixed with the High Court, where any applications for appeal will likely be made.

Unless successfully appealed, the judgment is legally binding on the defendant insurers regarding the interpretation of the representative sample of policy wordings considered by the court. The FCA notes that it also provides "persuasive guidance" for the interpretation of similar policy wordings and claims, which can be taken into account in other court cases including in Scotland and Northern Ireland, by the Financial Ombudsman Service (FOS) and the FCA in considering whether insurers are handling claims fairly.

COVID:19: FCA comments on pandemic exclusions in PII for general insurance and mortgage intermediaries

The FCA has published its latest Regulation Round-up. Among other things, it includes comments relating to pandemic exclusions in professional indemnity insurance (PII) for general insurance (GI) and mortgage intermediaries.

The FCA notes that some PII insurers are introducing exclusions following the COVID-19 pandemic. It reminds firms of the need to meet FCA rules and highlights the following as some of the relevant requirements in this area:

  • GI and mortgage intermediaries' PII must meet the minimum requirements in MIPRU 3.2;
  • providers should consider whether exclusions are consistent with their product governance obligations including, under PROD 4.2, whether the product is compatible with the needs, characteristics and objectives of the target market; and
  • firms distributing PII will need to meet ICOBS requirements. This includes the need to consider whether an exclusion is consistent with the needs of their customer under ICOBS 5.2.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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