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Law360, London (November 2, 2020, 1:35 PM GMT ) Insurer Hiscox warned on Monday of another hit of up to $40 million if travel and commercial restrictions imposed to tackle the COVID-19 outbreak continue into next year, as England gears up for a second national lockdown this week.
The London-based insurer said in its third quarter results that the extra money for paying out will come on top of the $387 million it has already set aside to pay out on claims linked to the first lockdown.
Prime Minister Boris Johnson said on Saturday that nonessential businesses, including pubs and restaurants, will close from Thursday until Dec. 2. Senior ministers refused on Monday to rule out an extension to that lockdown if infection rates remain high at the start of next month.
Insurers have been hit hard by claims from postponed or canceled events, such as the 2020 Tokyo Olympics, which was due to take place in July but will now be held next summer.
Hiscox said it has already set aside $150 million in the first half of the year for paying for claims on event cancellation insurance, and another $25 million if restrictions on mass gatherings continue until the end of the year.
"If these restrictions continue into 2021, Hiscox has an additional $30 million to $40 million potential exposure relating to event cancellation," the insurer said. Hiscox said it has also reserved $130 million to pay on claims from business interruption insurance, most of which was from its U.K. division.
The insurer was one of eight defendants in a High Court test case, brought by the Financial Conduct Authority on behalf of an estimated 370,000 businesses denied cover under their policies. A judgment in the case, on Sept. 15, found largely in favor of policyholders.
Hiscox, along with five other insurers, the FCA and a policyholder group, have filed "leapfrog" appeals directly to the Supreme Court over the judgment.
"Hiscox recognizes these are extremely difficult times for businesses and is committed to seeking an expedited resolution to contract disputes relating to business interruption through the industry test case," the company said on Monday.
The insurer said that it continues to negotiate with the FCA, groups of claimants and other insurers "to resolve any outstanding issues" as it awaits the appeal. The regulator said last month it hopes to resolve the dispute without the case needing to be brought to appeal.
--Editing by Ed Harris.
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