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(Sharecast News) - Aviva on Thursday said it expected to pay a net £160m of claims related to the coronavirus shutdown with the majority of payments in business interruption, travel insurance and commercial lines.
The UK's biggest insurer said the crisis posed challenges to meeting its 2022 targets, warning that second quarter sales had already been hit as it warned about the impact from a severe economic downturn.
First quarter new business sales rose 28% to £12.3bn boosted by strong bulk annuity sales while general insurance net written premiums were up 3% to £2.4bn.
Aviva said second quarter new business sales had fallen across many of its businesses due to worldwide lockdowns with sales volumes for the year overall "likely to remain below expectations".
"In addition to the estimated general insurance claims impact from Covid-19, financial market performance and economic activity are also likely to impact revenues in our savings and asset management businesses, which are sensitive to asset values," the company said.
It added that it expected £200m in net business interruption claims, warning that the "vast majority of our commercial policies do not cover business interruption claims arising from Covid-19.
"However, we anticipate potential areas of exposure in certain specialist schemes and broker programmes, and we have paid claims in the UK and Canada where coverage exists."
Aviva and fellow insurer QBE face possible legal action from the Hospitality Insurance Group Action (HIGA) over disputed coronavirus-related claims, while sector peers are also under fire from policyholders over interpretation of policy wordings.
HIGA was formed by business owners who believe their policies should payout after the government forced them shutter as part of the lock down. Insurers have said policies do not cover pandemics.
The action group said lawyers at Mishcon de Reya had reviewed 500 business interruption policies to determine if there are grounds to bring a claim and narrowed it down to Aviva and QBE, adding that the law firm believed there were grounds to bring legal action at the High Court.
Sector peer Hiscox is also under fire from around 400 businesses which have formed an action group over its denial of Covid-19 claims, while Allianz and RSA face separate challenges.
Britain's Financial Conduct Authority said recently it planned to launch a test case in the High Court in an effort to provide some clarity for insurers and their customers.
21 Sep 2023 12:52
IN BRIEF: Watchstone interim loss widens on costs of claim against PwC
Watchstone Group PLC - former insurance software provider originally called Quindell; now cash shell pursuing litigation claims - Pretax loss widens to GBP6.0 million in six months that ended June 30 from GBP2.1 million a year before. Has no revenue, so loss is due to higher administrative expenses. These primarily are legal costs, including GBP4.9 million for Watchstone's claim against PricewaterhouseCoopers LLP. The High Court dismissed Watchstone's claim, and while it seeks permission to appeal, Watchstone must pay PwC's legal costs, as well as its own. Other outstanding claims are against Aviva Canada, part of Aviva PLC, and against UK tax collector HMRC over the recovery of historic VAT. "We remain focussed on realising the group's remaining litigation assets as efficiently as possible and are confident of returning further cash sums to shareholders in due course," Watchstone says.
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