The biggest uncertainty now facing insurers is whether they will have to pay for a raft of business interruption claims, the Bank of England has said, ahead of a court ruling on the matter this month.
The court will decide whether existing policies should cover the big losses caused by the coronavirus crisis.
Anna Sweeney, the BoE’s executive director for insurance, said the sector has remained robust in the face of the pandemic’s impact on assets they hold and on liabilities.
“The highest level of uncertainty remains around business interruption,” she told a City & Financial online event.
The Financial Conduct Authority will be in court to clarify whether the current wording of business interruption insurance policies can support claims for compensation as a result of the pandemic lockdown.
“A number of insurers are taking steps to make sure there is no ambiguity about who is and isn’t covered for a second wave,” Sweeney said.
Hiscox is among the eight insurers whose policies will come under scrutiny by the courts this month, although the trial could still go to an appeal.
“We would expect both sides to abide by the outcome,” Hiscox chief executive Bronek Masojada said.
Lloyd’s of London chairman Bruce Carnegie-Brown said insurers should consider whether their products were correctly labelled and said brokers had a responsibility to provide clear advice on what is covered.
Businesses have been struggling to get pandemic cover, with Lloyd’s calling for state-backed policies for pandemics and other systemic risks.
Reinsurers have said they will exclude communicable disease cover from all policies from 1 January, Masojada said.
Asked if insurers should bolster capital buffers, Sweeney said her “personal instinct” was that the emphasis should be on being clear on what liabilities were covered and managing those risks.