Finalised Guidance: Business interruption insurance test case

Read Finalised Guidance (PDF)[4]

Read FS20/8: Business interruption insurance test case: feedback on draft guidance[2]

On June 1, we published a short consultation on draft guidance[1]. We are now finalising that guidance.

Why we are publishing this guidance

We want to highlight steps that we consider firms should be taking to:

• identify the potential implications of the test case on their decisions regarding claims and complaints
• keep policyholders informed about the test case and its implications
• treat policyholders fairly during the test case and when it is resolved

This guidance should be read with the following key documents from the test case: the particulars of claim[5], representative sample of wording[6], questions for determination[7] and issues matrix[8].

Who this applies to

This guidance applies to:

• An insurer (as defined in FCA’s Handbook of rules and guidance) which, before the date that the test case began, underwrote a relevant non-damage business interruption policy.
• A managing agent (as defined in the FCA’s Handbook) which, before the date that the test case began, performed functions for a member of Lloyd’s in respect of a relevant non-damage business interruption policy (and references to ‘insurers’ in this guidance should be read as including managing agents).
• An insurance intermediary (as defined in the FCA’s Handbook) which carried out insurance distribution activities in respect of a relevant non-damage business interruption policy before the date that the test case began (but only the paragraphs of this guidance which specifically refer to insurance intermediaries under the heading ‘Communicating with policyholders generally during the test case’ apply).

Next steps

The guidance[3] comes into immediate effect upon being published on Wednesday 17 June 2020.

We expect the insurers covered by the finalised guidance to review their relevant non-damage business interruption policies to classify them as set out and to report the outcomes of these reviews to us by Wednesday 8 July. This will enable us to publish a list of relevant non-damage business interruption policies affected by the test case.

We also expect firms to consider what general communications they need to make to their non-damage business interruption policyholders. Firms should also consider what communications they need to make to individual policyholders, by 15 July, who have made a claim or complaint in the light of the guidance and the review of relevant non-damage business interruption policies.

We expect relevant firms to identify claims and complaints (included those already declined or where the firm has made an adjustment or deduction for general causation) that are potentially affected by the test case and to take account of this guidance when handling these claims and complaints.

We will review the guidance in light of the progress of the test case and in any event within 6 months of it coming into effect to assess whether it is still needed.