It is hoped the High Court test case, brought forward by the Financial Conduct Authority (FCA), will provide clarity regarding the issue to both policyholders and insurers.
Since originally announcing the action at the beginning of May, the FCA says it has approached 56 insurers; and reviewed more than 500 relevant policies from 40 insurers.
From this review, the watchdog has identified a sample of 17 policy wordings that 'capture the majority of the key issues that could be in dispute' from a pool of 16 insurers, eight of whom have been asked to take part in the court case.
They are: Arch Insurance, Argenta, Ecclesiastical, Hiscox, MS Amlin, QBE, RSA and Zurich.
However, the FCA says this is only a 'representative sample', and that the test case would provide guidance for the interpretation of 'many other' business interruption policies.
It adds that it plans to publish a comprehensive list of insurance firms that will be potentially affected by the action, in early July.
"The court action we are taking is aimed at providing clarity and certainty for everyone involved in these business interruption disputes, policyholder and insurer alike," says Christopher Woolard, interim chief executive at the FCA.
"We feel it is also the quickest route to this clarity and by covering multiple policies and insurers, it will also be of most use across the market.
"The identification of a representative sample of policies and the agreement of insurers who underwrite them to participate in these proceedings is a major step forward in progressing the matter to court."
Hiscox, who is currently facing pressure to pay out on its business interruption policies from a combined alliance of The Night Time Industries Association (NTIA) and Hiscox Action Group, says it welcomes the FCA's announcement.
"As set out in previous announcements, Hiscox recognises these are extremely difficult times for businesses and is committed to seeking expedited resolution of any contract dispute," it says in a statement.
"Hiscox has agreed to assist the FCA by participating alongside other insurers in the test case in order to provide certainty for businesses and brokers on the application of policies as quickly as possible.
"As described in the company's Q1 Trading Statement on 5 May, Hiscox is actively settling claims for event cancellation and abandonment, media and entertainment and other segments including travel. There is no change to any of the estimates or guidance provided in that update, and the Group's capital position remains robust."