Thousands of hospitality businesses risk losing their right to Covid-related insurance compensation unless the Financial Conduct Authority (FCA) intervenes to extend a fast-approaching claims deadline, industry leaders have warned.
In an open letter to the regulator, disputes firm Stewarts, alongside major hospitality trade bodies representing more than 155,000 businesses, has called on the FCA to require insurers to extend the business interruption (BI) claims deadline by two years. Without intervention, many firms fear they will be locked out of compensation to which they may be legally entitled.
Most Covid BI policies in England and Wales are due to expire in March next year under standard six-year limitation rules. These policies were designed to support businesses forced to close during the pandemic, allowing companies to borrow up to £5 million through participating banks.
However, Stewarts estimates that fewer than 50,000 claims have been accepted by insurers from an estimated 370,000 policies that could potentially qualify. The firm argues that the looming deadline will render the majority of unresolved claims time-barred, leaving thousands of hospitality businesses significantly out of pocket.
The letter warns that, unless the claims window is extended, unresolved cases could lead to a surge in litigation from policyholders able to shoulder the cost and risk of legal action. This, the groups say, would place unnecessary strain on the courts and public resources.
Signatories include UKHospitality, which represents more than 130,000 venues, the British Beer & Pub Association, the Music Venue Trust, the Association for Indoor Play and Gamechangers, which represents the competitive socialising sector. Together, they argue that many small and medium-sized firms lack the resources to pursue individual legal claims and would be unfairly excluded from compensation.
The groups say an extension would “avoid unjust avoidance of policy coverage” for businesses that have acted responsibly and in good faith throughout the claims process.
Aaron le Marquer, head of policyholder disputes at Stewarts, said more time was essential to allow recent court rulings to be properly implemented. He highlighted a forthcoming Supreme Court judgment, due in February 2026, which will determine whether insurers were entitled to deduct furlough payments from policyholder claims.
“It is vital that adequate time is now allowed for the latest court decisions to be implemented,” he said. “We are asking insurers to commit to following the Supreme Court’s decision regardless of whether claims would otherwise have been time-barred.”
Stewarts and the trade bodies are urging the FCA to issue guidance no later than January 20 next year, requiring insurers to continue paying valid claims for two additional years beyond the current March deadline. They argue that the extension would provide clarity on key unresolved issues, including the treatment of furlough payments, which remains one of the most contested areas in Covid BI cases.
The hospitality sector has endured years of pressure, first from forced closures during the pandemic and then from sustained cost inflation. More recently, businesses have faced a sharp rise in employment costs following measures introduced in Rachel Reeves’s first budget last year.
During the pandemic, the Treasury injected billions of pounds into supporting pubs, bars and restaurants, including a £2 billion package announced in the 2021 budget, alongside wider grants and business rates relief. Industry leaders now warn that failing to resolve outstanding insurance claims risks undoing much of that support, pushing otherwise viable businesses into financial distress.
