Suncorp And IAG Reduce BI Reserve Provisions After Court Ruling
Suncorp And IAG Reduce BI Reserve Provisions After Court Ruling
Following a recent court decision on the subject, Australian insurers IAG and Suncorp both declared that they have reduced their COVID business interruption (BI) reserve provisions.
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The decision to refuse special leave to appeal the Federal Court’s earlier rulings concerning the interpretation of the COVID BI policies was made last week by the High Court of Australia.
As there were anticipated to be some circumstances where cedents had made significant reserves for potential COVID recoveries they now won’t get, there had been conjecture that the decision could help to induce more confidence among reinsurance capital providers in deploying to Australia.
Suncorp And IAG Reduce BI Reserve Provisions After Court Ruling
And now, IAG has confirmed that it will undertake a share buy-back of $350 million, funded by a reduction in its BI provision following the court decision.
The company has reduced its net BI provision from $975 million to $615 million, having previously suggested that it would refine this provision as the legal position became more certain.
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Similarly, Suncorp says that “the majority” of its $179 million provision for potential losses due to COVID BI claims as at June 30th will now be released, again reflecting the outcome of the High Court case.
The Full Court of the Federal Court delivered its judgment back in February 2022, when it decided to uphold the arguments of insurers in four of the five matters in the test case which were appealed.
Suncorp And IAG Reduce BI Reserve Provisions After Court Ruling
The Court found that in those four matters the insurers were not liable to indemnify the policyholders.
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In the other case, the Full Court upheld the earlier decision to the effect that cover had been triggered but that there were substantial issues as to whether the policyholder could prove any relevant business interruption.
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