This morning, global insurance company AXA has shown that business interruption impacts from the COVID-19 pandemic continue to be felt, with the company announcing a EUR 300 million settlement offer for French restaurants.
Calling it an “amicable solution”, AXA France said that it is “offering a clear financial solution to the 15,000 restaurant owners who hold its “standard policy” with extended coverage for business interruption losses linked to administrative closure.”
A “fixed and definitive lump-sum payment” will be offered to AXA France’s restaurant clients, with this proposed settlement intended cover an amount equal to 15% of the turnover of catering activity over pandemic lockdown periods that affected the French restaurant industry.
AXA France will offer this settlement to clients from 21 June until 30 September 2021 and the clients need to liaise with their AXA contact to apply for it.
Patrick Cohen, CEO of AXA France explained, “AXA has played its role and acted in a responsible manner during the pandemic, supporting hundreds of thousands of customers, and making a significant contribution to the financing of the economic recovery. We regret the misunderstandings with some of our restaurant clients, especially given this sector was particularly hard hit during the sanitary crisis.
“As restaurants are finally allowed to welcome their customers again, we are taking this initiative so that everyone can look to the future and focus on the restart of economic activity. Such a large initiative is unprecedented for AXA France. It will be implemented throughout the country by our 3,000 tied agents and all our distribution partners with the support of our teams.”
AXA France does not believe the insurance contracts this settlement will apply to actually covered administrative closures, a fact it says was recognised by the Bordeaux Court of Appeal this week.
Despite that, the insurer said that it hopes this, “amicable solution aims to allow everyone to look to the future.”
So AXA is offering to settle with the restaurant industry in France, providing some funds to help restaurateurs to recover from the costs of the pandemic related lockdowns and business interruption they suffered due to COVID-19.
It shows that business interruption claims are still flowing through the global insurance and reinsurance market and that this kind of settlement may be seen elsewhere around the globe, lifting the ultimate cost of pandemic shutdowns for the sector.
AXA Group explained that the EUR 300 million of settlement costs are gross of tax but before accounting for any reinsurance related benefits or recoveries.
The company has not made it clear whether it anticipates being able to make any claims against its reinsurance program for these additional costs.
However, AXA did say that the “cost of the settlements, net of tax and after reinsurance, will be offset due to favourable claims frequency developments in France and Europe caused by Covid-19, which might suggest the company does feel its reinsurance could support these costs for the non-damage business interruption settlement.
AXA clearly feels that it doesn’t need to increase its EUR 1.5 billion of reserves for claims from the COVID-19 pandemic.
The question is whether reinsurance capital is going to support this settlement, which could have the potential to see some reinsurers avoid paying as AXA maintains the policies did not cover the pandemic shutdowns?
Another question this raises is how long is the non-damage business interruption tail related to the pandemic?
With legal action continuing in the US and also Europe, there is the potential for additional claims to be honoured, or settlements to be agreed, with potential ramifications for reinsurance capital, including any exposed ILS funds.