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14 CONTRACT CERTAINTY

Reinsurance Practice and the Law

Chapter 14 CONTRACT CERTAINTY INTRODUCTION 14.1 The drafting and production of reinsurance policy wordings has, until recently, not been a high priority for the London market. This position has now changed as a result of the Financial Services Authority’s (“FSA” 1 challenge to the market in December 2004 to achieve “contract certainty” by the end of 2006. The stated aim of the FSA was to achieve this goal for risks which incept on or after 1 January 2007. The Market Reform Group (“MRG”) published a Contract Certainty Code of Practice Principles and Guidance (“CoP”) in June 2007 which applies to insurance as well as reinsurance contracts. This consolidates all previous industry guidance on contract certainty, from the subscription and non-subscription markets, into a single document. The definition of contract certainty adopted by the MRG in the CoP is the achievement of “complete and final agreement of all terms between the insured and insurer by the time that they enter into the contract, with contract documentation provided promptly thereafter”. This requires the insured and insurer to ensure the completion and final agreement of all policy terms before inception. The CoP is available from the MRG’s website. 2

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