The UK supreme court has handed victory to the Financial Conduct Authority’s (FCA) and policy holders’ appeal against the high court ruling that insurers’ business interruption insurance didn’t cover Covid-19 related claims.

Initially shares in insurer Hiscox (HSX) fell around 6% on the announcement but they have subsequently moved back into the black, up 3.5% to £10 after the company released a response.

It said the ruling was restricted to cases where businesses were ‘mandatorily closed’ which represents around a third of Hiscox’s 34,000 UK business interruption policies.

This positive and the fact that the company has already provided for losses relating to the case explains the turnaround in the Hiscox share price.

The ruling increased the company’s estimate for business interruption by $48 million net of reinsurance.

Following today’s judgement, the company estimates its exposure to restrictions already announced in 2021 at less than $20 million if those restrictions remain in place until the end of March.

While it may be small beer for Hiscox, it is very important for the thousands of smaller businesses that have been impacted by the government lockdowns, who are now eligible for payment.

There is a small risk to insurers that the defendants claim damages  in relation to the losses incurred while fighting the case.

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Issue Date: 15 Jan 2021