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Insurance Broking Practice and the Law

Chapter 9



9-1 Commercial reality dictates that there must be some means of varying the terms of the policy of insurance. The variation may be required prior to inception of the policy to tailor an insurer’s standard terms to meet the requirements of a particular insured, or after inception. A post-inception variation usually arises because there is a change in the risk which requires the insured to seek a modification of the terms agreed at inception. The scope for an insurer to seek a post-inception variation of terms is far more limited, although such a variation may arise, for example, where, in response to tightening market conditions, insurers subscribing a multi-year policy subject to annual notice of cancellation1 agree to continue on risk only if the terms are varied. These instances are likely to be less frequent in a soft market cycle. It may also arise where a subscribing insurer has gone into run-off or become insolvent and the replacement insurer is unwilling to take on the unexpired risk on identical terms.

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