Makhlouf vows ‘action’ against insurers avoiding payouts for valid Covid claims

Central Bank governor’s comments come in the wake of landmark court rulings

Central Bank governor Gabriel Makhlouf said on Thursday his organisation "won't hesitate to take action" against insurers avoiding payouts on legitimate Covid-19 business interruption claims, after landmark rulings in both the Irish and UK courts recently.

The regulator has analysed more than 250 policy types across more than 30 insurers to determine whether the cover provided under each policy should operate in the specific circumstances of Covid-19, Mr Makhlouf told the European Finance Forum, an annual conference run by the Financial Times and IDA Ireland, which is taking place virtually this year.

“Where we are of the view that ‘cover’ or ‘causation’ exists and where claims are being rejected by insurers, we have clearly communicated this to the relevant firms,” he said.

“Arising from our supervisory interventions to date, a number of insurers have already accepted and commenced settling claims. This occurred and was ongoing prior to the recent court judgments on business interruption insurance.”


Mr Makhlouf said the Central Bank has been clear from the outset that where contracts are worded ambiguously, it should be interpreted in favour of customers.

“Let me make it clear to the insurers involved: we’ve been clear with you on cases where valid cover exists. The UK courts have been clear with you. And now the Irish courts have been clear with you. Any continuing failure to do the right thing by your customers is inexcusable and we won’t hesitate to take action accordingly.”

A spokeswoman for the bank declined to comment on how many of the 250 policy types it believes offer cover, or what action the regulator could take. “We have a range of powers available to us and firms cannot be in any doubt about our expectations on this issue,” she said.

Potential risk

A potential risk faced by the industry is the prospect of the Central Bank launching enforcement investigations against certain firms, which could lead to fines.

On January 15th the UK supreme court ruled that certain policies of six insurers – including Hiscox, RSA and QBE, which carry out business in the Republic – should cover losses caused by coronavirus lockdowns. The UK Financial Conduct Authority brought the legal case and estimates that a combined £1.2 billion (€1.37bn) could now be paid out.

Sources say that Hiscox, QBE and others subsequently began contacting commercial policyholders in the Republic while awaiting the outcome last week of a case involving a group of four publicans and FBD.

FBD promised last Friday to make interim payments to up to 1,100 pubs and restaurants covered by its pub policy after the four publicans won their case.

The final cost for FBD may top €60 million, double what the insurer has set aside for the issue, according to analysts. However, the ultimate cost, including that borne by reinsurance companies that have taken on some of the risk, will be much higher.

Mr Makhlouf signalled last July that the Central Bank was taking advice on whether to take legal action to resolve standoffs between insurers and businesses. However, it has not done so to date.

While this has attracted criticism from certain political quarters and from consumer advocates, law firm Eversheds Sutherland noted this week that the Republic does not have the equivalent of the UK's financial market test case scheme.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times