10.1 Introduction

Unlike other kinds of commercial business, insurance deals with risks. The risk is transferred from the insured to the insurer. At the pre-contract stage, the insured is required to disclose material information to the insurer about the subject matter and the nature of the risk to be covered, so as to enable the insurer to assess the risk to the best extent and then decide whether or not to accept the risk and, if so, on what terms.1 This topic has been considered in Chapter 8, “The insured's duty of disclosure and representations,” of this book. However, after a contract has been entered into, the insured risk may increase, either due to the insured's intentional act or by a third party's act known or unknown to the insured. Whether the insured has the duty of notifying the insurer in the event of an increase of risk during the insurance period is a question of some difficulty.2 Most civil law countries have adopted the concept of increase of risk,3 but the common law world seems not to share the general concept of increase of risk; instead, the doctrine of warranty is commonly employed to protect the insurer against change of risk during the policy.4