Irish regulator mirrors FCA by publishing supervisory framework to clarify Covid BI claims

The Central Bank of Ireland, the regulator for financial services firms in Ireland, has this week published its ‘Covid-19 and Business Interruption Insurance Supervisory Framework’, seeking to following in the footsteps of the FCA and clarify the coverage conundrums surrounding business interruption (BI) claims linked to the Covid-19 pandemic and associated lockdown regime.

The framework, published on 5 August, plans to help achieve the “early identification and resolution of issues which have the potential to cause customer harm, driving clarity for affected businesses as quickly as possible”.

It covers:

• The Central Bank’s approach to the identification of potentially systemic issues of customer harm.
• The Central Bank’s expectations of insurers to address those issues where identified.
• Details the escalation strategy for intervention by the Central Bank where necessary.

In line with this approach, the regulator emphasised regulatory requirements for insurance firms to act honestly, fairly and in the best interest of their customers – it added that it “expects firms to adopt a customer first approach to the resolution of business interruption issues”.

The Central Bank further acknowledged that some claims will be more black and white in terms of whether BI cover is available or not, however the new framework is devised to specifically handle cases where “the position is unclear but a strong or reasonable argument can be made that they do provide cover”.

“The framework is designed to identify and monitor insurers’ approaches to these types of policies, to set out our expectations in relation to same and to indicate that matters will be escalated where those expectations are not met,” it continued.

The regulator added that it would “examine all possible options within the full suite of our powers and intervene where appropriate”.

Covering the costs

The Central Bank’s director general of financial conduct Derville Rowland additionally outlined the regulator’s expectations around insurers’ potential financial obligations to policyholders, including towards those who have sought litigation.

He said: “We recognise that Covid-19 has placed immense pressure on many businesses and that they need clarity on business interruption insurance issues.

“Our framework, underpinned by robust supervisory engagement and legal analysis, seeks to drive that clarity. The framework reiterates our core message to firms: that they honour valid claims in full and pay them promptly.

“Furthermore, where cover is disputed and businesses have pursued litigation, insurance firms should be cognisant of the significant costs burden faced by their customers. We therefore expect that in circumstances where the firm obtains the benefit of a court’s interpretation of issues at hand, a firm should agree to pay the reasonable costs of customer plaintiffs in agreed test case litigation and should not seek its costs against these plaintiffs.

“Finally, where a legal action has been concluded and the final outcome has a wider beneficial impact for other similarly impacted customers, firms will be required to take urgent remedial action to ensure that those customers obtain the benefit of the final outcome.”