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Business Interruption Insurance – FSCA cracks the whip

FSCA Communication 34 of 2020 contains details of the Regulator’s views on the contentious issue of business interruption (BI) insurance in the wake of Covid-19.

In virtually all cases, insurers denied liability. In response to a multitude of complaints from policyholders, the FSCA requested details of the various policy wordings, and published Communication 34 to provide clarity to the industry on how it should proceed.

Policy wording categories

The FSCA identified six such categories and provides guidance on the main requirements that must be proven for a valid BI claim.

Radius and Notification
Notifiable Disease
General Exclusion
Closure or Restriction
Closure by Order


“While the FSCA acknowledges that BI claims are complex in their nature, insurers that have policy wordings which fall under the (1) Radius and Notification, (2) Radius; and (3) Notifiable Diseases categories must, when they have received all relevant documentation from a policyholder, not delay the payment of any claim provided policyholders are able to prove the requirements highlighted and discussed in paragraphs 4.1, 4.2 and 4.3 above.”

For the categories of “Closure or Restriction” and “Closure by Order”, the trigger for a valid claim is the contagious or infectious disease at the business premises of a policyholder and not the National lockdown. Therefore, unless a policyholder can prove that the insured’s business was interrupted by the presence of Covid-19 at its business premises, the policyholder would have no valid claim.

“All insurers affected are requested to action BI insurance claims in line with this Communication. Any insurer which holds a view contrary to that expressed by the FSCA in this communication, should inform the FSCA of its view and the basis upon which this view was formed as a matter of urgency.”

“Insurers should take note that it is the intention of the FSCA, that insurers who do not deal with BI claims as stated in this Communication will be directed to do so in terms of section 144(1)(b) of the Financial Sector Regulation Act, 9 of 2017 (FSR Act)…”

Click here to read FSCA Communication 34 of 2020.

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