May 22, 2022

Volume XII, Number 142


May 20, 2022

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Government confirms its position on insurers deducting grants from COVID-19 BI settlements

HM Treasury has responded to a letter from The Association of British Insurers (ABI), confirming the Government’s firm expectation that “grant funds intended to provide emergency support to businesses at this time of crisis are not to be deducted from business interruption insurance claims.

The ABI’s Letter

Huw Edwards, Director General of the ABI, wrote to John Glen, Economic Secretary to HM Treasury, last week regarding the issue of insurers deducting certain government grants from COVID-19 claims payments.

Mr Edwards’ letter confirmed that 12 insurance firms (including Avivia, Zurich, and RSA, among others) have agreed not to deduct the Coronavirus Small Business Grant Fund; the Retail, Hospitality and Leisure Grant Fund; the Local Authority Discretionary Grant Fund (and their equivalents in devolved nations) from any COVID-19 claims payments. Where such deductions have already been made, the firm concerned will adjust the settlement amounts accordingly.

Mr Edwards also detailed further actions the insurance industry is taking to help businesses recover from the effects of COVID-19, including continuing to process claims worth around £1.8 billion and setting up an £84m COVID-19 Support Fund to help communities and charities who have had their funding hit by lockdown.

HM Treasury’s Response

In Mr Glen’s prompt response (sent the same day as ABI’s letter), he commended those firms who have committed to not making deductions to BI settlements. HoweverMr Glen noted his disappointment that certain firms had not made the same commitment, stating that the deductions are “quite clearly not in line with the intention of the support schemes“.  Mr Glen commented that these deductions mean taxpayer funds are “channelled into savings for insurers, rather than supporting businesses“.

As such, Mr Glen encouraged insurers who have not made the commitment to follow the example set by others, “to respect the spirit of these government support schemes, and to consider the difficulties being faced by businesses during this time.

Mr Glen warned that if grant deductions continue to be made, the Government will consider further action against those insurers engaging in such conduct.

Mr Glen also noted that the FCA had recently sent a “Dear CEO” letter to insurers. This letter set out the FCA’s expectations for insurers following the recent High Court judgment in the BI test case, including the requirement that insurers consider carefully the appropriateness of making grant deductions from claims payments.


The Government has clearly stated that the financial support issued to businesses during the COVID-19 pandemic must be protected. The Government’s stance will therefore provide some level of comfort to businesses with outstanding insurance claims who received government grants as a result of COVID-19. Those insurers who have not pledged against making grant deductions should seriously consider altering their position on the matter, or risk potential further action from the Government.


© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 276

About this Author

Garon Anthony Litigation Attorney Squire Patton Boggs Birmingham, UK

Garon is a partner in the Litigation Practice Group. He advises clients across the full range of commercial dispute issues, including cyber liability/data breach, professional negligence, banking, pensions and insurance.

Garon regularly acts for clients who are subject to investigations or disciplinary proceedings by national and international regulators, including most recently the Financial Conduct Authority, the Financial Reporting Council and the Dubai Financial Services Authority.

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Sarah Neill Commercial Litigation Attorney Squire Patton Boggs Birmingham, UK

Sarah Neill qualified into the Commercial Litigation team in September 2019 after completing her training contract with the firm. During her time in the team, Sarah has assisted on a wide variety of disputes, including breach of warranty, product liability, debt recovery and breach of contract. Sarah acts for a diverse client base, from individuals to PLCs.

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