Insurance group Hiscox has agreed a settlement with a group of around 400 policyholders over business interruption losses due to lockdowns during the pandemic.

Thousands of businesses tried to make claims with insurance companies at the start of the pandemic but many refused to pay out.

But a test case at the Supreme Court in January this year found that seven major insurers should make payments totalling around £1.2 billion.

The Hiscox Action Group (HAG), representing the 400 businesses, also participated in the hearing and announced on Monday that a settlement has been reached.

Both sides agreed that the amounts should remain confidential.

The test case was brought by the Financial Conduct Authority (FCA) to assess whether insurers were entitled to exclude insurance claims made against the Covid-19 pandemic.

Judges found that policies should provide cover and the FCA urged insurers to pay out to around 370,000 businesses thought to be affected.

Hiscox said after the ruling that it regretted the “uncertainty and anguish” caused by the court wrangle and subsequently revealed it has set aside 475 million US dollars (£341 million) to cover pandemic-related payouts.

In a joint statement, Hiscox and the action group, funded by Harbour Litigation Funding, said: “The settlement is in line with the Supreme Court judgment and the proceedings have now been resolved to the mutual satisfaction of all parties.”