The UK’s Financial Conduct Authority (FCA) has defended its guidance on how policyholders may wish to prove the presence of COVID-19 in an area around their premises when making business interruption claims.

Several insurers and trade bodies suggested in draft paper responses that it was inappropriate for the FCA to issue guidance, pointing to a reference in the High Court test case judgment and suggesting the regulator was improperly reversing the burden of proof.

“The guidance does not do that,” the FCA says. “Instead, the guidance describes sources of evidence which policyholders can use to seek to discharge the burden of proof on them.”

The FCA says the guidance is both “appropriate and necessary” to facilitate fair claims handling, assisting SMEs in the task of proving the presence of COVID-19 and setting clear expectations for insurers and intermediaries in handling claims.

Some BI insurance policies which the courts decided should, in principle, provide cover for the pandemic require the policyholder to demonstrate that there was at least one case of COVID-19 in a specific zone relative to the insured premises.

The FCA suggests in the case of a 25-mile (40 kilometre) radius, evidence could include media reports, National Health Service data on deaths due to COVID-19, Office of National Statistics data on deaths due to the virus and reported cases in other instances such as by local authorities.

The regulator also plans to publish a COVID-19 calculator to help insureds if they choose to use a geographical distribution, where reported cases are averaged and weighted across an area, or an undercounting statistical model, which may be useful due to limited testing before the first national lockdown.

Other scenarios are also considered in the guidance, expected to expire on January 31 next year.