2012

The Chartered Insurance Institute 2011

P21
Commercial insurance contract wording
Purpose
At the end of this unit, candidates should be able to demonstrate an understanding of:
the purpose, scope and use of commercial contract wording in the London Market;
the issues to consider when drafting or agreeing a contract wording;
the importance of greater contract certainty to the London Market.
Assumed knowledge
Assumed knowledge may not appear in detail within the learning outcomes but forms part of the syllabus
and may be examined. It is assumed that the candidate already has the knowledge gained from a study of
general insurance principles, coverage, practice and regulation and the law of contract.
Summary of learning outcomes
Understand the regulatory regime and the initiatives within the market to achieve contract clarity and
certainty.
Understand the legal issues affecting insurance and reinsurance contracts.
Understand the scope, coverage and limits of insurance contract wording.
Understand the main conditions applied to commercial contract wording.
Understand the implications of contract wordings as applied to different types of reinsurance.
Important notes
The syllabus is examined on English law and practice unless otherwise stated.
The April session will test the legal position as of 31 August of the preceding year.
The October session will test the legal position as of 28 February of the same year.
Candidates should refer to the CII update website www.cii.co.uk/updates for the latest information on
changes to law and practice and when they will be examined.
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The Chartered Insurance Institute 2011
4. The main conditions applied to
commercial contract wordings
4.1 Classication of terms;
4.2 Loss / claim notication;
4.3 Claims handling / adjustment;
4.4 Insureds rights and duties;
4.5 Disputes;
4.6 Cancellation;
4.7 Consistency of language used / denitions;
4.8 Conditions precedent.
5. The implications of contract wordings
as applied to different types of
reinsurance
5.1 Reinsurance wording and slip policies;
5.2 Types of reinsurance requiring different types of
wording proportional, non-proportional, excess
of loss, quota share;
5.3 Proportional Treaty Wording Clauses Period of
Agreement and Termination Clause; Premium,
Commission and Prot Commission Clauses;
Submission of Accounts Clause; Claims Notication
Clauses;
5.4 Non-Proportional Treaty Wording Clauses
Reinsuring Clause; Cover Limit and Priority Clause;
Ultimate Net Loss Clause; Net Retained Line
Clause; Follow the Settlements; Claims Control
Clause; Claims Cooperation Clause; Currency
Fluctuation Clause; Jurisdiction Clause;
5.5 Event denitions.
1. The Regulatory Regime and market
initiatives
1.1 Regulation Financial Services Authority and
Lloyds.
1.2 London Market Principles and other market
initiatives.
1.3 Common problems arising from contract wording.
1.4 The aim of achieving greater contract clarity and
certainty.
1.5 Market wording and clauses.
1.6 Market Reform Contract.
1.7 Role of market associations.
2. The legal issues affecting insurance
contracts
2.1 Legal relationship between the parties insured,
insurers, reinsurers, brokers, claimants;
2.2 Slips, contract wording and the factual matrix;
2.3 The rules of construction and interpretation of
contracts;
2.4 Law and jurisdiction;
2.5 Duties of the insurer and broker drafting,
checking, signing;
2.6 Leading underwriters agreements;
2.7 Underwriting agents and delegated authorities.
3. The scope, coverage and limits of
insurance contract wordings
3.1 Features of the Schedule Insured, Period, Limits,
Premium, Territorial Scope;
3.2 Incorporation of proposal form and information;
3.3 Scope of coverage and basis of attachment;
3.4 Exclusions exclusions applicable to individual
sections of the wording, exclusions applicable to
whole wording, buy-backs to exclusions;
3.5 Dening the Sum Insured or Limit of indemnity
claim, event, occurrence, cause;
3.6 Excess or deductible and their interpretation;
3.7 Endorsements and Addenda;
3.8 Special requirements for certain types of business.
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The Chartered Insurance Institute 2011
Reference materials
Colinvaux & Merkins Insurance contract law. Robert M
Merkin. London: Sweet & Maxwell. Looseleaf, updated.
Dictionary of insurance. C Bennett. 2nd ed. London:
Pearson Education, 2004. Also available online at
www.knowledge.cii.co.uk/resource/dictionary-insurance
(CII/Personal Finance Society members only).
Insurance law: text and materials. Ray Hodgin. 2nd ed.
London: Cavendish, 2002. Also available online via www.
knowledge.cii.co.uk
The international hull clauses: analysis of the 2002,
1995 and 1983 hull clauses: against the background of
the Marine Insurance Act 1906. Stephen B Goodacre. 1st
ed. London: Witherby, 2003.
The law of insurance contracts. Malcolm A Clarke. 6th ed.
London: Informa, 2009.
The law of reinsurance in England and Bermuda. P T
ONeill, J W Woloniecki. 3rd ed. London: Sweet and
Maxwell, 2010. MacGillivray on insurance law: relating to
all risks other than marine. 11th ed. London: Sweet and
Maxwell, 2008.
Marine insurance clauses. N Geoffrey Hudson and Tim
Madge. London: Informa Professional, 2005.
Reference book of marine insurance clauses. London:
Witherby. Annual.
Reinsurance practice and the law. Reinsurance Division
of Barlow Lyde and Gilbert. London: Lloyds of London
Press. Looseleaf, updated.
Periodicals
The Journal. London: CII. Six issues a year. Also available
online (CII/Personal Finance Society members only)
at www.knowledge.cii.co.uk/category/resource-type/-
journal.
Websites
CII Knowledge Services www.knowledge.cii.co.uk
Financial Services Authority www.fsa.gov.uk
Market reform www.marketreform.co.uk
Examination guides
Guides are produced for each sitting of written answer
examinations. These include the exam questions,
examiners comments on candidates performance and key
points for inclusion in answers. You are strongly advised to
study guides for the last two sittings. Please visit
www.cii.co.uk to buy online or contact CII Customer
Service for further information on 020 8989 8464. Older
examination guides are available (for members only) at
www.knowledge.cii.co.uk/category/resource-type/
exam-guides.
Exam technique/study skills
There are many modestly priced guides available in
bookshops. You should choose one which suits your
requirements.
Reading list
The following list provides details of various publications
which may assist with your studies. Periodicals and
publications listed will be of value in ensuring candidates
keep up to date with developments and in providing a
wider coverage of syllabus topics. Any reference materials
cited are authoritative, detailed works which should be
used selectively as and when required.
Note: The examination will test the syllabus alone. The
reading list is provided for guidance only and is not in itself
the subject of the examination.
CII/Personal Finance Society members can borrow some
of the additional study materials below from Knowledge
Services. CII study texts can be consulted from within the
library. For further information on the lending service,
please go to www.knowledge.cii.co.uk.
Commercial insurance contract wording. London: CII.
Study text P21.
Birds Modern insurance law. John Birds. 8th ed.
London: Sweet & Maxwell, 2010.
Contract law. Anne Ruff. 5th ed. London: Sweet &
Maxwell, 2008.
A guide to reinsurance law. Robert Merkin, ed. London:
Informa, 2007.
The law of reinsurance. Colin Edelman ... [et al]. Oxford:
Oxford University Press, 2005.
London market reform. James Willison. London: CII
Knowledge Services. Updated as necessary. Available
online via www.knowledge.cii.co.uk (CII/Personal
Finance Society members only).
An outline of the law of contract. Sir Guenter Treitel. 6th
ed. Oxford: Oxford University Press, 2004.
Recent developments in insurance contract law. Robert
Merkin, updated by Sam James 2010 . London: CII
Knowledge Services. Updated as necessary. Available
online via www.knowledge.cii.co.uk
(CII/Personal Finance Society members only).
Recent developments in reinsurance law. Robert Merkin,
updated by Sam James 2010 . London: CII Knowledge
Services. Updated as necessary. Available online via
www.knowledge.cii.co.uk (CII/PFS members only).
Reinsurance in practice. 4th ed. Robert Kiln, Stephen
Kiln. London: Witherby, 2001.