(Adds more detail)
By Huw Jones
LONDON, June 17 (Reuters) - Britain's insurers should use
findings from an emergency stress test in April to check if they
can meet business interruption claims from the COVID-19
pandemic, the Bank of England said on Wednesday.
"Our analysis showed that the sector was robust to downside
stresses, with the highest uncertainty centred on certain
general insurers’ liabilities – particularly those arising from
business interruption claims," the letter from the BoE to
insurance chiefs said.
The BoE was publishing findings from its annual stress test
of insurers for 2019 that was supplemented by further testing in
April after markets fell sharply in response to lockdowns.
It said the 20 largest insurers, 15 large syndicates and
Lloyd's of London insurance market that were tested should
closely monitor risks presented by COVID-19 and update their
capital assessments.
"We expect boards to assess whether the findings apply to
their firm and present an action plan to their supervisors to
address them," the letter said.
Life insurers would be able to manage the severe stresses
tested for, but general insurers face uncertainty over their
ability to pay claims from companies that shut during the
lockdown.
Companies are challenging insurers that refuse to pay such
claims.
Britain's Financial Conduct Authority is going to court in
July to seek legal clarity on whether the wording in a sample of
policies mean that compensation claims are valid.
"We support this initiative and will work with the FCA and
firms to understand the potential financial impact of the court
case," the BoE said.
Last year's test also included an "exploratory" scenario on
insurers' ability to measure the impact of climate change on
their business. It found "significant gaps" that must be
addressed before more detailed findings can be shared.
The next regular annual stress test has been delayed to 2022
to give firms more time to focus on dealing with COVID-19.
(Reporting by Huw Jones; Editing by Kevin Liffey, Kirsten
Donovan)
