Firms will be required to review all relevant claims and complaints for test case judgement implications

The FCA has today published guidance for insurers and insurance intermediaries setting out its expectations on how claims and complaints relating to non-damage business interruption (BI) policies resulting from the coronavirus pandemic should be handled during the FCA’s test case.

The test case, which was initially announced on 1 May, will see the FCA bring to court key relevant cases that provide clarity on specific policy clauses in order to gain an independent view on disputed BI policy wordings – these cases, chosen on an agreed basis with affected insurers, will showcase a representative sample of the most frequently used policy wordings that are leading to confusion and uncertainty.

The concluding court declaration of the test case aims to provide legal clarity on how BI claims linked to the Covid-19 pandemic should be dealt with by the insurance industry.

Reviewing policy wordings

Today, the FCA has advised that firms should check whether the test case samples will apply to any of their policies and whether claims decisions will be impacted or depend upon the results of the test case.

If the policy was underwritten by more than one insurer, the insurer identified as the lead insurer, or who has underwritten the largest portion, or who has claims responsibility should undertake this assessment.

In the case of Lloyd’s syndicates, the lead managing agent is required to carry out this review.

These reviews, conducted by a senior manager, are required to be completed within the next two weeks, supported by clear documentation. This information is to be submitted to the FCA, divided into three categories:

  • Policies where their decisions on claims may (if already taken) be affected by or (if not yet taken) depend on the final resolution of the test case.
  • Policies where the final resolution of the test case may provide guidance on the interpretation or effect of a relevant policy wording does not or will not affect their decisions on claims.
  • Policies where the test case is not relevant to the interpretation or effect of a relevant policy wording.


The FCA further proposes that insurers keep policyholders up to date regarding the test case’s implications on their BI policies – these updates could be published on a firm’s website, for example.

Within three weeks, insurers are also required to inform policyholders whether or not their claim or complaint will be involved in the test case and any implications resulting from this. Policyholders involved in the test case should receive regular individual communications from their insurer regarding each stage of the test case process.

Any claims or complaints elements that fall outside of the test case’s jurisdiction should still be dealt with in a timely manner by insurers and communicated clearly to policyholders.

Any offers to settle should also include communications informing policyholders about the test case and its possible implications.

On the conclusion of the test case, the guidance goes on to advise insurers to reassess all test case claims and test case complaints they rejected prior to the final resolution of the test case, in accordance with regulatory rules – firms will need to apply the final judgement to this decision-making process.

Moving forward

The FCA today asks that policyholders, insurers, stakeholders and legal advisors provide their comments on the published guidance by 3pm on 5 June.

One firm involved in the test case is Argenta Syndicate Management Limited (ASML). In a statement, the company said: “ASML supports the FCA’s aim to achieve clarity for all concerned in this unprecedented situation and to do so in a manner which provides the quickest route to achieving such clarity.”

Broker Marsh, on the other hand, submitted information to the regulator last month to help inform the test case. In a statement published on 18 May, it said: “Marsh will be providing a submission to the FCA and although this will remain confidential for obvious reasons, we will provide the FCA with summaries of certain key policy issues together with our own views and representations for clients.

“We advocate for our clients, and always work to achieve the best possible solutions and outcomes. We will continue to engage with the FCA process as it develops.”