RSA Insurance Ireland set aside €46 million in its 2020 accounts to deal with business interruption claims stemming from the Covid-19 crisis, in the wake of landmark UK and Irish court rulings earlier this year.
However, the Dundrum-based company expects that its net cost will come to only €9 million, thanks to the fact that most of its insurance risks have been taken by its UK parent, RSA Group, through so-called reinsurance contracts.
Even allowing for a recovery of reinsured risk, the Irish unit, led by chief executive Kevin Thompson, recorded a loss of €12.6 million last year from a €15.5 million profit for 2019.
The 2019 accounts were signed off on March 12th last year, the day then taoiseach Leo Varadkar announced initial Covid-19 restrictions in a televised address from Washington, DC. Accounts for last year were finalised on March 10th, after the key UK and Irish test case rulings.
As of the end of September, insurers operating in the Irish market had paid out €130 million on business interruption claims stemming from the pandemic, according to Central Bank of Ireland figures. These include 3,485 claims that had been fully settled, and 886 who had received interim payments.
Insurance Ireland, the industry representative group, estimates that the sector has ringfenced more than €430 million for business interruption payouts.
The UK supreme court ruled in January that a number of insurers – including Hiscox, RSA and QBE, which write business in the Republic – were liable to pay out on certain policies after the country’s Financial Conduct Authority (FCA) took a test case.
The High Court in Dublin ruled in February in favour of four publicans who challenged FBD on its refusal to pay out on its pubs policy. While the High Court heard a so-called quantum hearing in July on the public house cases, a ruling on the matter is not expected until December.
The Central Bank wrote to a number of insurers in February pressing them to pay out on valid business interruption claims, following the decisions.
FBD has estimated that this will ultimately cost the company and its reinsurers a total of €183 million in claims and expenses, as the judgment has ramifications for about 1,100 other pub policy holders. As of the end of June it had paid out €20 million in interim settlements, while it awaits the court decision in December on the final quantum of payouts.
Sources said that RSA has so far paid out about €13 million from its provisions pot.
RSA Ireland’s auditors KPMG assessed management’s view of the extent of business interruption c