What is a quotation?
A proposal or indication from the insurer as to terms and conditions
What are the legal implications of an insurer providing a quote?
- they don’t remain valid indefinitely
- if client tries to accept quote after expiry date insurer is not obliged to agree
- if no expiry date defined ‘reasonable time’ applies
- insurer is not on risk if client has not accepted quote
- if client accepts with time period insurer can’t back out
Formation of contract - steps
- UW indicates agreement with stamp
- UW scratches slip
- Indicate share of risk they are taking
- insurer states UW reference for risk
The line the insurer has agreed to is known as…
Written Line
Written lines from various insurers might add up to more than 100%
Brokers share of risk they need to place is called…
An “order”
At what point are the insurers on risk?
When UW puts their line down on brokers slip. But depends on inception date of the policy
What is signing down?
Where insurers shares of a risk are reduced down to 100%
Reduced line size is then known as the ‘signed line’.
If written lines total 150%
You would divide each line by 150, then multiply by 100.
Eg.
Written line is 50% of risk
50/150= 0.333 * 100= 33.33% signed line
Reasons for terminating a contract (natural)
- Insured cancels
- Insurer cancels eg. In marine if vessel sold
- Fulfilment eg. Vehicle total loss
- Expiry of policy period
Reasons for terminating a contract (unexpected)
- Breach of duty of fair presentation eg. If breach deliberate or reckless
- Breach of warranty
- Fraud
Why might the existing insurer not want to quote the renewal?
- Contract has been loss-making
- Exiting that class of business
Why might the existing insurer want to keep a risk at renewal as much as possible?
- Costs less to renew than to write from scratch
- The more stable the portfolio of clients, the more reliable the statistical data
What are ‘days of grace’
An ‘elastic’ end to the previous policy which allows scope in late renewal. Unless provision made they do not exist.
How do UWs make sure they don’t have to pay for losses before inception?
Warranted no known or reported losses - noted on the MRC
When are proposal forms used in the London Market?
Certain classes such as Yacht and PI insurance
Used in conjunction with MRC
Yacht treated as personal lines
Roles of the MRC
- broker puts together and summarises clients risk in standard format for presentation to the UWs
- UWs formally indicate their written lines
- sent to client as copy of the insurance contract
Three slightly different versions of standard MRC are…
Open Market MRC - broker places risks individually
Line Slip MRC - group of UWs arranged by broker
Binder MRC - DA given to third party who operates within limit of authority and reports back risks they have written
MRC split into these six sections…
Risk details Information Security details Subscription agreement Fiscal and regulatory Broker remuneration and deductions
General Underwriter’s Agreement (GUA) - what is the purpose?
- agreement between UWs as to who deals with contract changes
- extent of authority given to leaders to agree changes
- flexibility for classes of business to refine rules to suit their requirements
- ensure all UWs informed of changes
GUA business specific schedules divided into three parts, and include these changes
1) slip leader only
- restrictions in coverage
- leader only changes
- monetary exposure reduced
2) slip leader plus agreement parties
- anything leader has to agree to as per MRC
- anything not in 1 or 3
3) all UWs
- changes to geographical scope
- backdating policy period
- anything to be agreed by all UWs as per MRC
What are agreement parties
Insurers set out in the MRC responsible for agreeing changes to the contract on behalf of the other insurers
What are the sections of the Market Reform Contract Endorsement?
- Risk and endorsement identification: UMR and sequential numbering of changes
- contract changes
- information (if required)
- agreement
- contract administration and advisory (if required)
Change evidenced to insured by sending them a copy of the MRCE or similar doc
Structure of general policy document
Heading Recital Signature Operative clauses Exceptions Conditions Schedule
What are the two types of condition
- Condition precedent to contract
(Includes requirement to have insurable interest) - Condition precedent to liability
(All claims have to be notified within x days)
Condition must be satisfied for the contract to exist or insurer to have any liability
Condition doesnt have to be stated to be a condition precedent to liability- court interprets terms according to Intention and Effect
Exclusions
Market exclusion: radioactive contamination
Most general Uws exclude war from standard hull/cargo/aviation policies
War on land not freely available
Requirement to formally request permission to write any type of war business as part of business planning process
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Chapter 1 - Business Nature Of The London Market30
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Chapter 9 - Delegated Underwriting23
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Chapter 10 - Claims Handling26
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Chapter 8 - Business Process34
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Chapter 2C - Marine22
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Chapter 7 - Underwriting32
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Chapter 2b - Aviation Classes10
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Chapter 6 - Insurance Intermediation24
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Chapter 5 - Legal And Regulatory Requirements28
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Chapter 4 - Market Security10
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Chapter 3 - Reinsurance21
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Chapter 2a - Non- marine Risks Written In The London Market42
