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Law360, London (November 26, 2020, 1:31 PM GMT) -- Insurance giant Aviva PLC said on Thursday that it expects to take a £100 million ($130 million) hit from claims linked to COVID-19 during the course of the pandemic, lower than the £165 million estimate it published earlier this year.
The insurer said in its third quarter results that the lower projected total was the consequence of it handling fewer claims than expected. The British company added that most of the claims would come from business interruption and travel insurance policyholders.
"This reduction… is mostly a result of lower claims frequency during the third quarter reflecting reduced economic activity," Aviva said.
The company said in its half year results in August that it would pay out a total of £441 million in claims from the pandemic, although £276 million of that would be borne by the company's reinsurance. It is not clear what the revised claims total will be, but the company confirmed that the new figure of £100 million did not include the additional amount that would be paid by reinsurers.
The insurer has said that the "significant majority" of its policies for interrupted business included exclusions for new and emerging diseases, meaning that it was not offering cover against the COVID-19 outbreak.
But the company had some policies that contained wording drafted by brokers, where liability was less certain. Aviva said in August that, in those cases, its exposure would be determined by the outcome of a test case brought by the Financial Conduct Authority.
The High Court judgment in the case in September found that insurers which had sold the "Resilience" product, drafted by broker Marsh, would have to pay out to businesses forced to close during the first nationwide lockdown. Insurer RSA did not appeal the court's judgment on that specific policy wording, a move that would have implications for other insurers, including Aviva, Allianz, AIG and AXA.
A spokesperson for Aviva said that although it was not directly involved in the test case a small number of its policy wordings would be affected by its outcome.
"When a final determination is reached for each policy, we will communicate with customers and, where there is policy cover, pay claims promptly," the spokesperson added.
--Editing by Ed Harris.
Update: This story has been updated to add comment from Aviva.
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