Lloyd’s insurer Hiscox launched an equity placing of 20 per cent of its share capital and said its business interruption insurance exposure could range from £10m to £250m today.
Based on its share price at close the placing could raise approximately £400m.
Hiscox is facing potential legal action from a group of policyholders who say the insurer is failing to honour business interruption claims triggered by coronavirus and the subsequent lockdown.
“Hiscox UK’s property policies do not provide cover for business interruption as a result of the general measures taken by the UK government in response to a pandemic,” the company said.
The Financial Conduct Authority (FCA) said on Friday it would fasttrack some test cases to help provide legal clarity on business interruption insurance claims.
Hiscos today said its modelling suggested in the event of a 12-week lockdown it could take a hit of £10m to £250m net of reinsurance on business interruption claims.
Hiscox has previously said it was paying out for travel and event cancellation claims connected to the crisis, with an expected total of up to $150m.
Hiscox said if restrictions on travel and gatherings are extended beyond six months the claims could increase by an additional $25m.
The insurer said gross written premiums grew two per cent in constant currency to $1.181bn compared to the same quarter the previous year.
Hsicox said it was withdrawing its financial guidance for 2020 in light of the uncertain impact of covid-19 on the global economy.
“We remain confident in our ability to return to our normal 90-95 per cent combined ratio target range for the retail business in 2022,” the insurer said.
Hiscox said it was placing new ordinary shares of 6.5 pence each and also a subscription for directors and senior management of the company with the total amount not exceeding 19.99 per cent of its existing ordinary capital.
Hiscox said it had sufficient capital to pay for expected covid-19 claims and said the placing would allow it to “respond to future growth opportunities and rate improvement in the US wholesale and reinsurance markets, as well as prudently position the group to withstand a range of downside scenarios”.
Bronek Masojada, chief executive, said: “In the first quarter, Hiscox has seen continued growth in our Retail and London Market divisions. Hiscox Re & ILS remained cautious.
“The business responded rapidly to the changing circumstances caused by the global Coronavirus pandemic, and almost all of our employees around the world are working from home. We have redeployed staff to frontline roles where possible.
“We are paying claims for event cancellation and abandonment, media and entertainment and travel which are covered by our policies and in the UK we welcome the positive steps by the FCA to resolve disputes in the industry over the application of property policies relating to business interruption.
“We are announcing an equity placing today in order to respond to growth opportunities and rate improvement in the US wholesale and reinsurance markets. We have managed our investments prudently and our capital position is robust, with an estimated group regulatory solvency ratio at the end of March of 195 per cent.”