Statement regarding the judgment reached on the FCA's business interruption court proceedings

RSA Group


Today the Court handed down its judgment on the contractual interpretation of certain business interruption insurance policies in the UK market, following a court proceeding in July which was brought by the FCA on behalf of policyholders using the Financial Markets Test Case Scheme.

The Court examined a sample of lead policy wordings selected by the FCA.  RSA was one of 8 insurers directly involved in the court hearings, participating as defendant in relation to 5 of the policy wordings, across 3 schemes.  Our interpretations of some provisions impacting RSA were upheld by the Court and some were not.

RSA is committed to responding to the wide-ranging impacts of the pandemic in the best interests of our customers and business. Our H1 Interim Report showed that RSA had paid or reserved for c.£57m in claims in relation to COVID-19 losses, as well as participating in industry initiatives to provide support and relief to customers and communities affected in all our territories.

Based on our initial review, RSA estimates the additional financial impact to RSA of today’s judgment to be approximately £104m on a gross basis across its portfolio of relevant business interruption policies. After the application of our catastrophe reinsurance protection, RSA estimates the impact of this judgment to be around £85m which is in turn expected to reduce further through qualifying as a loss covered by the group-wide aggregate reinsurance programme.[1]

The court judgment is complex given the breadth of questions posed across the different policy wordings considered. If there are appeals, further legal actions, or other relevant rulings on these or other policy wordings not yet considered, they may impact our assessment of the estimated gross figure upwards or downwards, potentially materially. This, alongside the inherent complexity of business interruption claims more generally, means the financial impact of the judgment will not be fully resolved for some time but, as above, reinsurance protection is expected to apply should the figures increase.

Should there be any substantive changes to RSA’s position, we will communicate them at the time. RSA will also continue to communicate regularly with our customers to update them on the status of individual claims, including those impacted by the court case, and is committed to paying claims as quickly as possible as and when legal processes relevant to them are concluded.

The estimated cost to RSA of COVID-19 related claims reported at the half year has not changed materially since then, while the third quarter to date has seen the emergence of additional frequency benefits related to COVID-19. These benefits, together with the additional margin and COVID-19 related reserves established at half year, are expected to fully offset the impact on profit from the Court judgment, net of anticipated reinsurance recoveries.

Third quarter trading across the RSA Group to date has been strong (including and excluding COVID-19 effects), building on the performance reported at the half year. The Court judgment, together with this strong trading performance and greater clarity on market responses to COVID-19, makes it appropriate for us to take the next step towards normalising our financial profile.  Consequently, RSA will now resume ordinary dividend payments, with payment [2] of the delayed interim dividend for this year which we have set at 8p per ordinary share (2019: 7.5p) [3].


[1] The net impact ultimately depends on the profile of claims, how they aggregate under the reinsurance policy terms and the extent of other catastrophe and/or large losses eligible for cover under the group-wide aggregate policy (the Group Volatility Cover ‘GVC’).

[2] The record date for this interim ordinary dividend will be 13 November 2020 and payment date will be 4 December 2020.

[3] We also reiterate our continued intention to catch up on the 2019 final dividend payment (which was withdrawn in April) on the basis set out in our 2020 half year report.

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