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FSCA announces interim relief to insured’s with COVID-19-related business interruption claims

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Pending legal certainty on whether insurers are liable for COVID-19-related business interruption claims (BI claims), the Financial Sector Conduct Authority (the FSCA) and the Prudential Authority (PA) (the Authorities) released a statement on 24 July 2020 setting out the basis on which interim relief will be offered to certain insured’s with BI claims. 

The interim relief follows lengthy discussions between the Authorities and non-life insurers on two main issues:

  • the impact of the repudiation of contingency BI claims by some non-life insurers and delays in processing policyholders’ claims; and
  • the impact of this matter on the reputation of the non-life insurance industry.

The interim relief will constitute once off payments to policyholders and will be dependent on reinsurer support, financial impact and the number and types of policyholders.  As such, the interim relief will differ from case to case. The primary aim of the interim relief is to enable policyholders to continue running their businesses pending the outcome of the legal process. 

The Authorities stance on BI claims

To date, the FSCA has released two statements in which they articulate their stance in respect of BI claims.[1]  In both of the statements, the Authorities have noted that the issue of BI cover is complex.  This has been amplified by the Western Cape High Court judgment in the Café Chameleon v GuardRisk matter.[2]  The complexity of BI cover is mainly due to the different types of BI policies made available to the policyholder, which are standard business interruption cover and business interruption cover with an extension for infectious and contagious diseases. The latter type of business interruption policy constitutes approximately 3 – 5% of the policies in the market. 

The Authorities have stated that insurers are liable to pay BI claims based on policies with an extension for infectious/contagious diseases.  This is provided that the claim meets the specific requirements relating to the BI cover. The Authorities current stance is that the national lockdown should not be used as a ground to repudiate valid BI claims. Some international conduct regulators have adopted a similar stance, which is being challenged by insurers and reinsurers globally and locally.

Nature of the interim relief

The Authorities have set out the following guiding principles to be applied in determining the nature of the interim relief:

  • The focus of the interim relief should be on businesses that have been impacted the most by the national lockdown and also on small businesses.Businesses most impacted by the national lockdown are mainly those in the hospitality and tourism industry;
  • Should a court decide in favour of any life non-life insurer, the interim relief funds provided to a policyholder may not be claimed back by the non-life insurer from the policyholder. However, should the courts find in favour of policyholders, these funds will be set off from the total claim amount payable to a policyholder by a non-life insurer; and
  • The interim relief may either be offered on an interim basis pending legal certainty or as full and final settlement of the policyholder’s BI claim.This settlement should be reasonable and the implications thereof should be explained in writing to the policyholder.

Issue of prescription 

It has been agreed with most affected non-life insurers that, despite the time barring clauses in BI policies, non-life insurers will not raise the defence of prescription should a policyholder decide to institute legal action against the non-life insurer at a later stage.  However, for reinsurance purposes, non-life insurers may require policyholders to lodge their claims before certain dates.

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This bulletin was prepared by partner Deanne Wood and candidate attorney Emma Alimohammadi.

[1] The FSCA Communication dated 18 June 2020 and the FSCA Statement dated 9 July 2020.  See a recently published bulletin by Fasken Insurance Services on the FSCA’s Communication dated 18 June 2020 available at

[2] See a recently published bulletin by Fasken Insurance Services on the Café Chameleon judgment available at 


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