The QBE Insurance Group Ltd (ASX: QBE) share price is not climbing higher with the market today.
In morning trade the insurance giant’s shares are trading flat at $9.28 following the release of an announcement.
What did QBE announce?
This morning QBE provided an update on its UK operations and the impact that a ruling by the High Court of England and Wales will have on its business.
According to the release, the High Court of England and Wales has handed down its decision in the test case commenced by the UK Financial Conduct Authority (FCA) in June 2020.
This test case was undertaken to resolve legal issues concerning the interpretation of common business interruption policy wordings.
This includes some policy wordings of QBE’s UK operations, in the context of whether those policy wordings respond to COVID-19 and related government mandated nationwide lockdowns.
The company advised that the Court ruled in favour of QBE with respect to two out of three of its notifiable disease policy wordings examined and in favour of insurers with respect to denial of access policy wordings.
However, the Court ruled in favour of the insured with respect to one of QBE’s notifiable disease policy wordings. This means that some of QBE policyholders are entitled to claim an insurance payout for business losses suffered when the UK went into lockdown between March and June because of COVID-19.
QBE is considering its options to appeal that decision.
What is the damage?
QBE estimates that its UK business interruption claims exposure is around $170 million before allowing for recoveries under its catastrophe reinsurance protections.
However, it believes that catastrophe reinsurance will limit the net cost of business interruption claims in its UK insurance business to $70 million. This already formed part of the $335 million net cost of COVID-19 allowed for in its recent half year results.
The company advised that it has the opportunity to apply to the Court for permission to appeal some or all of the ruling, with a decision expected to be then made in October.
And while it acknowledges that the estimated gross cost to QBE could increase or decrease, the net cost is not expected to vary.
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