FBD vows to hold more capital amid Covid-19 risks to business

Insurer FBD Holdings, currently locked in a high-profile court battle with a group of pubs over whether it should pay out on Covid-19 business interruption claims, has pledged to maintain higher capital reserves to take into account risks facing the business, including from the pandemic.

The move follows engagement between the company and the Central Bank “on a range of matters”, it said in a statement on Tuesday afternoon.

Shares in FBD dropped almost 2 per cent in late trading to close at €5.98 as investors reacted to the news.

FBD has now committed to hold a so-called solvency capital ratio of 150 per cent and 170 per cent. That equates to 1.5 and 1.7 times the amount of cash reserves it estimates it would need to withstand a one-in-200-year loss event over the space of just 12 months.

The company added that it it would not allow the ratio to fall below 170 per cent without Central Bank approval.


The new target marks an increase from the company’s previous solvency capital ratio objective of between 120 and 140 per cent. It takes into account a number of things, including general risks in its general insurance book, the wider market, operational risk around its systems of governance and “potential uncertainties resulting from the Covid-19 pandemic, including business interruption claims,” FBD said.

At the end of June, FBD had a solvency capital ratio of 186 per cent, even after setting aside €30 million of provisions to deal with a potential negative outcome from the pubs case. The reserves figure also excludes €35 million ringfenced to cover a planned shareholder dividend payment that has been on hold since the onset of the Covid-19 crisis.

Goodbody Stockbrokers analysts estimate that an adverse finding in the pubs case could lead to costs of between 1.5 and two times the €30 million that FBD has estimated.

The test case, involving four pub companies, began in the High Court last week and has implications for more than 1,000 bars and restaurants insured under FBD’s pubs policy. A ruling is expected next month.

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