South Africa’s Prudential Authority expects that business-interruption claims linked to the Covid-19 pandemic poses little systemic risk to the insurance industry.
The regulator is in talks with the country’s Financial Sector Conduct Authority and insurance companies on claims from policyholders who incurred losses when they were forced to close because of a national lockdown to curb the coronavirus.
The matter remains a market-conduct issue, which the FSCA oversees, the Prudential Authority said by email.
“At this stage, we are not of the view that the business-interruption insurance issue has systemic implications for the industry,” the Prudential Authority said.
South African insurers are rejecting claims in cases where they say payouts are only triggered by physical events such as an infection at a company’s premises. But the FSCA last week warned the industry to stop broadly rejecting claims from businesses related to the COVID-19 lockdown, after a Cape Town court ruled against one local insurer.
In the UK, some insurers are starting to acknowledge that payments may be unavoidable. If a High Court hearing on policy wording goes against insurers, “it will have far-reaching consequences for losses, capital and valuations,” in the country, Bloomberg Intelligence credit analysts Arun Kumar and Zheli Zhang said in a note.
South Africa’s Prudential Authority last month suspended the issuance of new insurance licenses for six months because of the pandemic.
- South Africa Regulator Warns Insurers to Stop Broad Rejection of Virus Claims
- S. African Insurers Are Pushed to Pay COVID-19 Business Interruption Claims
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