The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Didn't bother to comment on this at first but seeing as no-one else has (and pretty much no-one has posted anything for ages...) The Lloyd's figure might well be described as "coughing up" figure and indeed Hiscox have already said that they expect a hit of some sort.
Anyway, the link is correct but has nothing to do with the "no damage BI claims" which are the real bone of contention. There's some very interesting stuff on the FCA website with everyone setting out their case and their defences on that issue.
https://www.fca.org.uk/firms/business-interruption-insurance
Hiscox seem to be saying "forget what the contract said and look at what the contract meant (by looking at what it didn't say)". I don't think that's how contract law works but it's certainly not something I know very much about.
Based on what I can see there, it sounds like Hiscox are probably right but the question is how much damage (if any) have they done to their reputation.
Whatever happens it's all very interesting.
Be lucky.
https://m.londonstockexchange.com/exchange/mobile/news/detail/14539481.html
Oxygen - the flood scenario is different as there would be actual physical damage at the premises so normal BI would kick in.
The Denial of Access extension would also probably kick in if there was no damage to the premises but neighbouring properties did flood which prevented access.
Dave, agree a standard BI policy won’t operate against a Pandemic it would only be those with a Contagious Disease extn or possibly Denial of Access if caused by LA closure depending on wdg. One issue I see is Insurers claiming that even if a CD extn could be argued to apply the claimant wouldn’t have had any trade anyway . Guess thats a bit like arguing your Flooded but we aint paying for your lost profit as the whole town was flooded so you wouldn’t have had any income anyway ! Thankfully not my problem to resolve , and hopefully not yours ! GL.
Dave - so Contingent BI (Business Interruption) requires there to be physical damage at a site in order for BI cover to kick in. We are not talking about Contingent BI, we are just talking about BI. We're not talking about the big event cancellation policies and pluvius stuff. We're talking about SMEs that have bought BI cover.
If the policy wording excludes pandemic then the Financial Ombudsman could still have a part to play (in saying that it was mis-sold or something like that) but if it doesn't then I'm guessing (without knowing all the facts) that coverage will be tested in the courts and then will probably respond.
I've also heard talk about extra damages being payable if insurers deliberately drag their heels. It was covered on the Sky News piece on the HAG with Richard Leedham from Mishcon (it's on youtube).
All very interesting.
Oxygen - this type of cover is more routinely included for Event type insurance, but not for normal business insurance that is aimed at covering companies in the event of physical loss or damage to property. although businesses are clearly suffering business interruption from the virus, it isnt as a direct result of physical loss or damage to their property
Dave...the All England Tennis Club ( Wimbledon ) did specifically request Pandemic Cover following the previous SARS outbreak and are reportedly in line for a £100m plus cancellation pay out. In other words Insurer’s should have been well aware that such global pandemics can occasionally occur. If C-19 was the first ever pandemic to occur one would have sympathy but there have been several examples even since the Spanish Flu ! . Unless specifically excluded I see them having a little problem, and I think they know it !
I believe most policy wording do have somewhere in the small print that pandemics are excluded. Not sure if Hiscox did or not but certainly most of the ones I’ve looked at do specifically exclude it.
Even if it did categorically exclude it, would any policyholder have decided not to proceed with cover on that basis? I personally don’t think they would have done
I work in the insurance industry. I just want to take issue with what a policy intends being of any relevance to what it actually says. If a policy is not intended to cover pandemics then it needs to state that in such a way as will hold up in a court of law. The wording that keeps being reported about notifiable diseases, local authorities, denial of access to premises etc all seems self-evidently to be met by the current circumstance. I'm not a wordings expert, nor a legal expert and I haven't seen any of the actual contracts so this i just an uninformed opinion BUT if you want to include those circumstances but exclude pandemics then you need a wording that does that. If people are fast and loose with their wordings then they are going to reap what they sow. The insurance industry keeps going bust or almost going bust on a regular basis (Savings & Loans, LMX spiral, WTC, Katrina, Global Financial Crisis) but manages to survive. When things go pear-shaped, rates go up and new entrants come in to make money. It's simple supply & demand - and greedy capitalism. Finally, if a company wants to sell itself on having simple, clear policy wordings then if it fails to stand by them then I struggle to see how the reputational damage might not be fatal.
I work in the insurance industry (not an insurance company though) and have to say I dont think Hiscox have done a lot wrong. there is no way in the world any policy wording was intentially written to include cover for a worldwide pandemic!. Most extensions for 'disease' claims are aimed at covering local outbreaks that effect specifically the policyholders premises.
it is a very difficutl time for businesses but why do people just expect that claims should be paid? If insurers had to settle all these claims, then they would all go bust and no policyholder would be paid! That is why the government have stepped in with their aid packages
not once will any policyholder ever have specifically asked for their insurance to cover this scenario. Unfortunately it is impossible to cover all scenarios
Support was very strong so Market liked it and will dump share accordingly later. Why not.
By excluding ordinary Shareholders via a Placing and not allowing participation via a Rights Issue clearly Hiscox think’s as much about its owners as it does its customers ! They really are out to destroy their Brand image.
Major blunder today! No way is £250m going to be enough
Expect market to realise in the next few days
Difficult to assess size of rights issue but they wouldn’t bother doing this to raise peanuts. Obviously many claims are now hitting their Reinsurers so they’ll be needing to reinstate these covers sharpish, which won’t be cheap. Thankfully I’m now out HSX but will look again once the dust has settled but suspect will be able to re-enter at a lower price, but their beginning to lose their shine.
Just how big will this rights issue be? Seeing how the Olympics loss now looks to be USD 2.5bn alone, I'd say we must be looking at a GBP 500m rights issue to right the boat with perhaps a 1/3 dilution to current shareholders once the price starts falling a bit more. This is going to be a massive series of losses going through especially now the group actions are gathering pace.
So when the CE of Lloyds states that C-19 losses will exceed those of Hurricane Katrina, you know you’re in for a bad time !
Double whammy for insurers as their investments dwindle and pension deficits balloon on top of their surge in claims. Treating customers fairly applies here
Not sure EL will give rise to an excessive exposure unless it can be seen that C-19 causes long term disability. The Death toll currently seems highest amongst the elderly/ retirees plus compensation claims for death can often be limited where there is little financial dependancy plus you’ll need to prove contagion happened in the workplace !
Must admit I agree completely with the Guardian. Since when is the coronavirus NOT a contagious disease? Whether or not it is also a pandemic is irrelevant, and a decent lawyer should be able to easily enforce the contract on behalf of litigants .
Unfortunately for HSX they also have considerable exposure under their general liability wordings both marine and non marine in this regard as well as employers liability wordings. They are notably not commenting on this as current commentators are focusing on the BI coverage implications. In fact they could suffer much heavier claims on the liability side.
Roll on those class actions! Time to stand back as never mind a £300m rights issue, they'll probably need a £500m rights issue.
Its rather naive of any Insurer to suggest that a policy extension covering unspecified contagious diseases, was never intended to cover global pandemics. If that was the case the wording should have said so.
Hiscox, the insurer, says it is “determined to help provide greater certainty for customers” because, touchingly, it recognises “these are extremely difficult times for businesses”.
If that sounds like willingness to pay out without a fuss on small firms’ claims for business interruption related to Covid-19, think again. The “certainty” that Hiscox has in mind is the type where the customer gives up hope of receiving a payment.
The Bermuda-based insurer expects to pay out between $150m (£120m) and $175m to larger firms with specific event-cancellation cover, but it hasn’t retreated one inch from its insistence that most small firms aren’t covered for pandemics. Local outbreaks of Legionnaire’s disease and suchlike are, apparently, what the policies meant by protection against closure of business premises caused by notifiable diseases.
Hiscox’s only concession is to cooperate with the Financial Ombudsman Service to resolve quarrels speedily. Since submission to the arbitration service is semi-obligatory anyway, Wednesday’s statement really added nothing.
Meanwhile, the list of small companies wanting to challenge Hiscox is lengthening; more than 100 nightclubs, pubs and bars have joined the ranks. We’ll see where the action leads but, unfortunately for claimants, regulators seem inclined to back insurers’ interpretation.
Whatever the outcome of the legal scrap, though, Hiscox would be well advised to avoid empty expressions of sympathy with angry customers. They’ll make it even harder to restore a reputation that is taking a battering.
Yep, they need to sort this out quickly but guess they are concerned over quantum. If they knew it to be low they surely wouldn’t risk this being dragged into court, as thats where it will go.