COVID-19 is not only a global health emergency but the cause of an economic tsunami. The once-thriving UK hospitality sector has been among the worst hit by the pandemic, while controversy with business interruption payouts continues. A circuit breaker – a ‘mini-lockdown’ designed to curb the rise in COVID-19 cases – would only aggravate the situation for the sector, leading to more insurance claims and potentially more policy cancellations.

Cover for pandemics is not customary in commercial insurance, but the more comprehensive business interruption policies will provide cover for non-standard causes such as notifiable diseases.

Go deeper with GlobalData

Data Insights

The gold standard of business intelligence.

Find out more

According to GlobalData’s 2020 UK SME Insurance Survey, nearly half (47.1%) of SMEs operating in the hospitality and restaurant sector cited having business interruption insurance.

In addition, almost a fifth (18.4%) of businesses in this sector reported they had cancelled their business interruption policy as a result of the pandemic.

Cases are rising rapidly again, and the UK faces new restrictions. With pubs and restaurants mandated to close again in Scotland and Northern Ireland for several weeks, and Wales considering implementing a circuit breaker, pressure to follow the same path is mounting in England. Businesses in the hospitality sector may be forced once again to fight for COVID-19 payouts, and insurers will be hit with a second wave of claims to deal with.

The High Court’s recent ruling in the test case brought by the Financial Conduct Authority determined that SMEs may be entitled to compensation from the disruption caused by the outbreak of the virus. While this is open to appeal, the ruling made it clear that depending on the policy wording, insurers could be liable for claims resulting from the government-imposed lockdown.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

Initially, insurers refused liability for COVID-19 claims, alleging that business interruption policies were not intended to provide cover for lost income due to pandemics nor cover government-imposed lockdowns. But the ruling will encourage more policyholders to make claims, or to make additional claims should premises be enforced to close once more. Thus, insurers could face a double bill without having even settled the first one.

The length taken to receive compensation will leave businesses frustrated, prompting more businesses in the hospitality and restaurant sector to cancel policies with their existing provider. A circuit breaker may be the answer, but it may not be for insurance.