QBE Insurance Group Ltd (ASX: QBE) announced this morning that a decision in the UK is expected to cost $70 million.
QBE’s UK news
QBE said that the High Court of England and Wales yesterday handed down its decision in the test case commenced by the UK Financial Conduct Authority (FCA) in June 2020. The FCA is similar to Australia’s regulator ASIC.
The FCA took on the test case to resolve legal issues about the interpretation of common business interruption policy wordings, including 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 UK court ruled in favour of QBE in two of out of three notifiable disease policy wordings examined and in favour of insurers generally in regards to denial of access policy wordings.
However, the court ruled in favour of insureds (meaning, against QBE) for one policy wordings and QBE is considering its options to appeal that decision.
Based on the notified claims affected and individual policy sub-limits, QBE estimates its UK business interruption claims exposure is around $170 million before allowing for recoveries under its catastrophe reinsurance protections.
QBE believes the catastrophe reinsurance will limit the net cost claims to $70 million which formed part of the $335 million net cost of COVID-19 in its recent FY20 half year result.
The insurer said this test case in complex and it will take time for the industry to fully consider and for claims to be resolved. All parties now have an opportunity to apply to appeal some or all of the ruling. A decision on applications will be made in October. QBE doesn’t expect the net cost to vary.
Summary
QBE was expecting something like this. However, I’m not a fan of insurers, their profit is regularly hit. I prefer consistent ASX dividend shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
