Commercial insurance contract

wording
Objective: To develop in the candidate:
• an understanding of the purpose, scope and use of commercial contract wording in the
London Market;
• an understanding of the issues to consider when drafting or agreeing a contract
wording;
• an understanding of the importance of greater contract certainty to the London Market.

Assumed knowledge and application skills:

Assumed knowledge may not appear in detail within the learning outcomes but forms
part of the syllabus and thus may be examined. It is assumed that the candidate already
has knowledge of:
• general insurance principles, coverage, practice and regulation;
• 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.

Notes:
• The syllabus will be based on English law and practice.
• The April session will test the legal position as of 31st August of the preceding year.
• The October session will test the legal position as of 28th February of the same year.

2011 P21
© The Chartered Insurance Institute 2010
 1. The Regulatory Regime and market
initiatives
1.1 Regulation – Financial Services Authority and Lloyd’s.
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 Defining 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.
4. The main conditions applied to
commercial contract wordings
4.1 Implied conditions;
4.2 Loss / claim notification;
4.3 Claims handling / adjustment;
4.4 Insured’s rights and duties;
4.5 Disputes;
4.6 Cancellation;
4.7 Consistency of language used / definitions;
4.8 Conditions precedent.
2011
© The Chartered Insurance Institute 2010
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 Profit Commission Clauses;
Submission of Accounts Clause; Claims Notification
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’ definitions.
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 most of
these additional study materials from CII Knowledge Services
and may be able to purchase some at a special discount.
For further information on lending and discounts go to
www.cii.co.uk/knowledge.
Commercial insurance contract wording. London: CII.
Coursebook P21.
Birds’ Modern insurance law. John Birds. 7th ed.
London: Sweet & Maxwell, 2007.
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
at www.cii.co.uk/knowledge/factfiles (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.
London: CII Knowledge Services. Updated as necessary.
Available online at www.cii.co.uk/knowledge/factfiles
(CII/Personal Finance Society members only).
Recent developments in reinsurance law. Robert Merkin.
London: CII Knowledge Services. Updated as necessary.
Available online at www.cii.co.uk/knowledge/factfiles
(CII/PFS members only).
Reinsurance in practice. 4th ed. Robert Kiln, Stephen Kiln.
London: Witherby, 2001.
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 Reference materials
Colinvaux & Merkin’s 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.cii.co.uk/knowledge/doi (CII/Personal Finance Society
members only).
Insurance law: text and materials. Ray Hodgin. 2nd ed. London:
Cavendish, 2002.
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 O’Neill, J
W Woloniecki. 3rd ed. London: Sweet and Maxwell, 2010. (New
edition due in 2009.)
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: Lloyd’s of London Press.
Looseleaf, updated.

Periodicals
The Journal. London: CII. Six issues a year. Also available
online at www.cii.co.uk/knowledge/journal (CII/Personal
Finance Society members only).
Technical Focus. Underwriting Faculty. London: CII
Knowledge Services. Six issues a year. Available online at
www.cii.co.uk/knowledge/underwriting (CII/PFS members
only).

Websites
CII Knowledge Services – www.cii.co.uk/knowledge
Financial Ombudsman Service – www.fos.org.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.cii.co.uk/knowledge/examguides.

Exam technique/study skills

There are many modestly priced guides available in bookshops.
You should choose one which suits your requirements. You will
also find advice at www.cii.co.uk/knowledge/careersupport
(CII/Personal Finance Society members only).
For a more interactive approach, you should consider: Winning
the brain game. London: CII, 2006. CD-ROM.

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© The Chartered Insurance Institute 2010