(Bloomberg) -- Insurers face the prospect of further payouts after a London court ruled in favor of policyholders on most key issues in a dispute over Covid-19 claims.
Hiscox Ltd., RSA Insurance Group Plc, Zurich Insurance Group AG and five other companies were named in the case, which was brought by the U.K.’s Financial Conduct Authority in an effort to bring legal clarity to policies held by at least 370,000 clients. The ruling is binding for the eight insurers, and could affect others that have policies with similar wording, including Allianz SE, American International Group Inc. and Chubb Ltd.
“The court has substantially found in favor of the arguments we presented on the majority of the key issues,” Christopher Woolard, interim chief executive of the FCA, said in a statement after the ruling was released on Tuesday. “Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders.”
Insurers may need to reexamine thousands of claims filed by firms holding business interruption and other policies that offered protection against unexpected halts to operations. While the full scale of the payouts isn’t yet clear, some insurers including Hiscox raised additional capital earlier in the year as Covid shut down economies worldwide.
Hiscox estimated the impact of the ruling at less than 100 million pounds ($129 million) after compensation from its reinsurers. That’s about 150 million pounds less than the company’s worst-case scenario, it said in a statement. Hiscox shares rose as much as 22.8% in London trading.
“This victory represents a positive outcome” for most policyholders, Richard Leedham, a Mishcon de Reya lawyer and leader of a group representing Hiscox clients in the case.
RSA said the ruling would mean about 85 million pounds in costs after reinsurance, with that amount expected to come down further. The insurer said it plans to resume dividend payments. Its shares rose as much as 4.6%.
The decision can be appealed, though the FCA said insurers should already be considering how to move claims forward.
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