Minister for Finance Paschal Donohoe has called on insurers not to reject businesses’ claims for loss of earnings if they were advised by the Government to shut up shop to contain the spread of Covid-19, amid evidence the industry is relying on fine print and technicalities to avoid payouts.

However, Insurance Ireland warned that the solvency of many of its members could be called into question, affecting their customers, if they paid out on claims that are not covered by policies and were unlikely to recoup money from reinsurance companies. Insurers typically sell on some of their risks to big international reinsurers.

Companies with business interruption cover are being told they are not eligible for compensation because they were not legally forced to close by the Government or because an employee had not contracted the virus on their premises, according to the Alliance for Insurance Reform.

“Where a policy states that a claim can be made when a business has closed as a result of a Government direction, because of a general notifiable infectious disease, the Minister believes that Government advice to close a business amounts to the same thing,” a spokesman for the Department said. “He believes that insurers should not try to distinguish between these situations, where there is a general infectious disease provision in a policy.”

Meanwhile, small- to medium-sized enterprises (SMEs) with infectious disease cover are being told a pandemic is not included, or that Covid-19, a new virus which only emerged in humans in the Chinese city of Wuhan late last year, was not listed as an infectious disease.

“In relation to business interruption insurance, whether a business can make a claim in relation to loss of earnings because of closure due to Covid-19 will depend on the specifics of their policy,” the spokesman said. “However, the Minister, as a general rule, believes that insurers should not attempt to reject claims on the basis of interpreting policies to their own advantage.”

Business groups and Opposition parties called for Mr Donohoe to bring insurance chief executives into his department, as he did banking executives last week, to seek to resolve the crisis.

While officials in the department have been engaging with industry body Insurance Ireland in recent days, no meeting between the Minister and insurers has yet been called.

Guidelines

Thousands of pubs, cafes, restaurants and leisure facilities have closed in the past two weeks – with massive knock-on effects for their suppliers – amid efforts to comply with the Government’s social distancing guidelines. Davy, the country’s largest stockbroking firm, warned last week that the Irish economy may swing what was expected to be a year of 5.5 per cent gross domestic product (GDP) growth to an outright contraction if the coronavirus was not brought under control quickly.

The experience of Irish businesses having claims rejected is being replicated worldwide by the insurance industry.

Insurance Ireland said on Monday evening that “standard” business interruption cover did not include forced closure by authorities “as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade”.

“A small number of businesses may have cover for closure due to an infectious disease, but this will depend on the precise nature of their cover,” it said.

The industry body added that if insurers paid out on claims that were not covered, it would generate “significant stability issues for the industry” and customers. “It is unlikely that reinsurance contracts would respond in such a scenario and therefore it would be a solvency event for many insurers,” it said.

Representatives for FBD Holdings, Allianz Ireland and AIG, said to be the main providers of business interruption insurance in the State, did not respond to efforts to secure comment.

Approach

Peter Boland, director of Alliance for Insurance Reform, whose members include pub groups, play centres and sports organisations, said that a lot of businesses had closed their doors “in good faith and for the common good” in the past two weeks.

“A lot were banking on business interruption insurance doing what it is supposed to do,” he said, adding that the Government now needs to step in to press insurers to change their approach.

“Policyholders also need to check their own policies very closely. I’ve looked at a large number of policies in recent days and the fall into three categories: very recent policies where coronavirus is clearly included, either by naming it or not naming it; policies that have a grey area that may need clarification from the [Financial Services and Pensions] Ombudsman or courts; and policies where coverage is not included.”

Adrian Cummins, head of the Restaurants Association of Ireland, which has 2,500 members, said: “The insurance industry is ducking and diving and trying to wriggle its way out of living up to its responsibilities to the economy during this crisis.”