* Insurers must assess refunding premiums during pandemic
* Court action to clarify wording of business policies
* QBE says receives letter from FCA
* Treasury Committee says risk to insurers' reputation
(Adds Treasury Committee, AXA, Zurich)
By Huw Jones and Carolyn Cohn
LONDON, May 1 (Reuters) - Britain's financial watchdog said
on Friday it would urgently ask the courts to clarify
uncertainty over whether businesses can claim compensation for
disruption caused by the coronavirus pandemic.
The Financial Conduct Authority (FCA) also told all insurers
to assess whether they should be giving partial policy refunds
during the pandemic.
A national lockdown to fight the pandemic has forced many
companies in the UK to temporarily suspend operations and
furlough staff.
"We have been clear that we believe in the majority of cases
business interruption insurance was not purchased to, and is
unlikely to, cover the current emergency," FCA interim chief
executive Christopher Woolard said in a statement.
"However, there remain a number of policies where it is
clear that the firm has an obligation to pay out."
The FCA said it had written to "a small number of firms" to
ask if they were declining business interruption claims. It said
it would seek a response by May 15 and then "consider which
firms to ask to join the court process".
However, the FCA said the court action - which industry
officials said was a first in insurance by the regulator and
could save years of costly legal battles - would not determine
how much could be payable under individual policies.
Lloyd's of London insurer Hiscox is among firms that
have come under pressure from small businesses to pay out for
business interruption, along with, AXA, QBE
and Zurich.
QBE said it had received a letter from the FCA on Friday.
AXA said it would work closely with the FCA, while Zurich said
the FCA move would provide clarity for customers. Hiscox and RSA
did not respond to requests for comment.
Broker Willis Towers Watson estimates UK insured losses for
business interruption, together with event cancellation, could
total up to $14 billion in relation to the pandemic, depending
on policy wordings.
Business interruption policies can be worded in 100 or more
different ways, industry sources say.
The Association of British Insurers (ABI) said it would
"support any process that will provide clarity and certainty for
the minority of customers who are disputing whether they should
be covered".
The ABI said most policies did not cover pandemics and noted
that the UK government had confirmed it would not seek to
retrospectively change contracts.
Eight U.S. states have introduced legislation which would
require insurers to pay claims, mainly to small businesses,
despite exclusions.
Mel Stride, chair of the UK parliament's Treasury Committee,
welcomed the FCA's move and urged insurers to pay businesses
that should be paid, or risk damaging the sector's reputation.
Alistair Handyside, executive chair of The Professional
Association of Self-Caterers, said many members believed they
were covered and he would be sending a report to the FCA.
PREMIUM REFUNDS
In guidance that will come into effect in mid-May, the FCA
suggested insurers could help struggling customers with premium
payment holidays or the waiving of administration, cancellation
and missed payment charges.
Insurers will also have six months to check whether their
products still deliver the benefits promised, the FCA said.
For example, it said boiler cover insurers may not be able
to offer the annual service included in many policies, while
liability insurance may not currently be relevant to businesses
such as hairdressers, bars and restaurants that are closed.
Insurers could refund some premiums or suspend monthly
payments for a certain period of time, the FCA said.
Motor insurer Admiral last week said it would
refund 110 million pounds to customers, following rebates made
by top U.S. motor insurers.
Allianz-owned LV= said on Friday it would refund
30 million pounds ($38 million) to car and motorbike insurance
customers in financial difficulties.
Hastings said it had made price reductions and was
considering more, while Direct Line said it was being
flexible with customers, including offering payment holidays for
those in financial difficulties.
($1 = 0.7997 pounds)
(Additional reporting by Muvija M., editing by Kirsten Donovan
and Susan Fenton)
