Business interruption insurance may be redefined in the wake of the coronavirus pandemic so that businesses can have more clarity about what they are covered against, Fitch Ratings says.

UK Insurers rejected many pandemic-related business interruption claims on the grounds of policy wording, arguing coverage did not apply in the circumstances, but a High Court test case largely favoured policyholders. An appeal decision is awaited.

“Given the scale of pandemics and the difficulty of precisely defining related losses due to business interruption, it may be that government-funded solutions will be developed in readiness for future pandemics, perhaps similar to those that apply in some jurisdictions for natural catastrophe losses,” Fitch says.

The ratings company says financial institutions will be exposed to long-lasting economic scars from the COVID-19 outbreak which could affect ratings in the longer-term.

“This is likely to be negative for the credit profiles of most banks and for US health insurers, but will be less significant for non-bank financial institutions and funds,” it says.