It recognises that this is an extremely difficult time for businesses and it is determined to provide greater certainty for its customers
Insurer – Hiscox’s business interruption insurance exposure could range from £110m to £250m, this is according to its trading update for the first three months of 2020.
This is based on the insurer’s analysis of a 12-week lockdown risk scenario taking into account the number of customers ordered to close businesses or with premises materially impacted. As well as savings likely to be made by customers under normal business expenses and government relief and the adjustment to business trends as a result of economic activity.
Hiscox is facing potential legal action following a group of policyholders claiming that Hiscox is failing to honour their business interruption pay outs triggered by coronavirus and the UK’s lockdown.
The insurer said it has enough funds to meet liabilities arising as a result of Covid-19 exposures.
Bronek Masojada, chief executive at Hiscox said: “In the first quarter, Hiscox has seen continued growth in our retail and London Market divisions. Hiscox Re and 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 front-line 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.”
In the insurer’s announcement on the 15 April, approximately 10% of its UK commercial customers purchase property insurance which includes an element of business interruption – representing 33,00 customers.
But it believes that 10,000 customers have been ordered to close as a result of the general national measures taken by the UK government.
It said that three-quarters of the remaining customers who purchase this cover are not dependant on premises.
“Like others in the industry, 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.” it said.
However, a number of UK policyholders have disputed the application of Hiscox’s policy in relation to business interruption.
“We recognise these are extremely difficult times for businesses and are determined to help provide greater certainty for customers. Along with the Association of British Insurers, we welcome the FCA’s recent initiative to accelerate resolution of disputes in the industry over the application of property policies relating to business interruption,” the insurer added.
Hiscox has also launched an equity placing of 19.99% of its share capital to position the group to respond to future growth opportunities and rate improvement in the US wholesale and reinsurance markets.
The placing could raise around £400m, based on its share price at close.
“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%, Masojada added.
The insurer said gross written premiums grew 2% in constant currency to $1.181bn compared to the same quarter the previous year.
But despite the challenges of the first quarter, the group’s regulatory solvency ratio at the end of March remains strong estimated at 195%, or a capital surplus of approximately $1.25bn.
Meanwhile Hiscox said it was withdrawing its financial guidance for 2020 due to the uncertainty of the impact of Covid-19 on the global economy.
“We remain confident in our ability to return to our normal 90-95% combined ratio target range for the retail business in 2022,” the insurer added.
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