Insurance group FBD has raised its estimate of the costs it faces as a result of a High Court ruling on business-interruption insurance earlier this year.

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

In its half-year results today (6 August), FBD said that it now expected the cost of claims arising from the case to be €183 million – €33 million higher than the previous estimate.

Quantum hearing

The company attributed the increase mainly to higher legal costs, and a reassessment of the estimated amounts that would be paid to customers.

The quantum hearing took place in July in the business-interruption case, with the judgment expected in December.

“Once the judgment is delivered, we will make claims settlements as expediently as possible, with interim settlements of €20 million already paid,” FBD said.

Tomás Ó Midheach (group chief executive) said that the issue of partial closure – whether indemnity should apply when pubs were open with restrictions – was the largest outstanding point of clarification.

Back in the black

FBD also set aside €13.4 million to cover payments arising from decisions made on the issue by the Financial Services and Pensions Ombudsman.

The insurer reported a pre-tax profit of just under €22 million for the first half of 2021, after a loss of €9.3 million in the same period last year. Its underwriting profit was €13 million, compared with a €4.7 million loss a year earlier.

FBD said that its average premium had fallen by 2.1% from a year earlier, with a reduction of 5.7% in motor premiums.

The company welcomed the introduction of Personal Injuries Guidelines in April, but said that their impact would take 12 to 24 months to fully emerge.

“Although recent trends indicate a reduction in general and soft-tissue damage awards, the early commentary in respect of drastically reduced awards needs validation,” it said.

Restrictions on movement

FBD said that the frequency of motor damage and injury claims had been lower than normal over the six-month period, mainly due to the Government restrictions on movement.

It added that the average cost of injury-claims settlements continued to be “slightly lower” than it had been before COVID.

FBD attributed this to a change in the mix of cases, which had been affected by court closures and the inability to engage in pre-trial negotiation.

The company warned, however, that higher costs for building materials and car repairs were leading to increases in property and motor-damage claims.