FBD Holdings - Mixed read-across from UK test case ruling

Davy Research
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The outcome of the UK’s business interruption (BI) test case has been eagerly awaited given FBD’s test case this October. Overall, the outcome was mixed; although the FCA claimed victory on the majority of issues, UK insurers’ share prices reacted positively. We interpret the share price moves as a positive response to insurers’ lower-than-expected at-risk loss estimates. This highlights how the market had been primed for worst-case scenarios. Though the court ruling raises the likelihood that FBD may be found liable, we believe that this is more than factored into its share price. FBD’s H1 solvency of 186% already includes a €30m BI provision as well as the €35m 2019 dividend accrual.