Insurer FBD has increased its estimate of the costs it faces as a result of a High Court ruling on business interruption insurance earlier this month.

In a test case involving four pub owners, Mr Justice Denis McDonald ruled that the businesses were entitled to be compensated under their policies for the disruption caused by COVID-19 restrictions.

FBD had argued that its business insurance policies do not cover events such as the pandemic.

Commitment to settling claims

In its annual results for 2020, it said it was setting aside €65 million to deal with the costs of the outcome — including net claims costs of €54 million and €11 million assumed for reinsurance reinstatement premium. The total is more than double its previous estimate of €30 million.

“The team at FBD remains determined to meet our customer obligations and we have commenced paying interim payments for all valid claims and will endeavour to settle claims as quickly as possible,” chief executive Tómas Ó Mídheach said.

The increased provision meant that the insurer recorded an underwriting loss of €4.4 million for the year.

Fewer claims

Meanwhile, FBD said there were fewer motor damage and injury claims during 2020 due to COVID-19 restrictions.

It said the average cost of injury claims settlements marginally decreased due to a change in the mix of settled cases, affected by court closures and the inability to engage in pre-trial negotiation.

It said new personal injury guidelines could bring about a “real reduction” in both personal injury awards and settlements by reducing awards and providing more consistency.

“Recent examples indicate a welcome downward trend in awards following Court of Appeal decisions,” FBD said.

“The Judicial Council's proposed capping of general damages would also significantly assist in reducing claims costs and consequently insurance premiums,” it added.

But FBD also described an increase in legal costs in recent months as “a worrying trend”.