Britain's financial services compensation body is "keeping an...

Britain's financial services compensation body is "keeping an eye" on insurers facing claims from companies whose business has been interrupted by the COVID-19 pandemic, its chief executive told Reuters.

Some insurers have balked at paying out on business interruption claims, and the Financial Conduct Authority (FCA) is asking the courts to clarify the wording in policies, which could lead to more claims being valid.

The FCA's Financial Services Compensation Scheme (FSCS) is braced for a rise in claims as some financial firms are expected to go under in the pandemic.

The FSCS is working with the FCA, Bank of England and finance ministry to quantify what could come down the line, said FSCS Chief Executive Caroline Rainbird, a banking industry veteran who took up the reins last year.

"We will look at scenarios, work with regulators and do desk-top exercises to make sure we are prepared," Rainbird said.

Credit unions and smaller financial advisers "could be an issue", along with more complex pension vehicles, she said. "We are keeping an eye on the insurance sector," she added.

Rainbird said the body could if needs be raise additional levies through the financial year. An FSCS running out of money would harm public confidence in financial services, she added.

FCA Chair Charles Randell said last week that the FSCS's levy on firms used to pay for compensation claims - which he said was already unacceptably high - is likely to increase due to COVID.

The FSCS had already bumped up its levy by 44 million pounds to 649 million for the 2020/21 financial year to meet claims from 11,600 investors caught in the collapse last year of London Capital & Finance investment firm.

It has compensated just 159 investors who had switched from shares to holding "mini-bonds" sold by the now defunct LCF.

This narrow base for compensation is being challenged in the courts, but in the meantime the FSCS is set to start paying out on claims from LCF investors who were mis-advised.

The FSCS will give a further update on LCF claims on Friday.