Plans are being made by the International Underwriting Association and Lloyd’s Market Association to prepare their members for fundamental changes being made to insurance contract law in the UK.
The Insurance Bill has been passed unanimously in the House of Commons and is expected to become law shortly after receiving Royal Assent. It replaces significant parts of the Marine Insurance Act 1906, which has formed the market’s legal framework for over a hundred years. The reforms will impact firms’ day to day operations in business insurance, consumer policy wordings and the consequences of fraud.
The IUA and LMA are working with a number of leading law firms and counsel to prepare guidance which will highlight changes in the law and where these will have a bearing on the placing of insurance and reinsurance contracts, on contract wordings and in relation to claims. The planned guidance will also include a detailed review of the new legislation and it is envisaged that a series of seminars will be run for LMA and IUA members following its publication.
Chris Jones, Director of Market Services at the IUA welcomed the passing of the Insurance Bill. “The IUA has been working closely with the Law Commission over a number of years to help establish a new set of laws that are fit for purpose and relevant to the modern insurance industry.
“Companies have been supportive of the need for reform and are now looking forward to operating under a more modern legal framework that provides greater clarity for clients.”
Kees van der Klugt, Director of Legal and Compliance at the LMA, commented: “In our evidence to the House of Lords committee, which carried out the substantive scrutiny of the proposed legislation, the LMA made clear its support for the core reforms: proportionate remedies for pre-contractual non disclosure; the banning of “basis clauses”; breach of warranty having the effect of suspending rather than discharging cover; and forfeiture being the remedy for fraudulent claims.
“We were less supportive of some other changes which did not appear central to the reform programme or to be problem areas in existing law. All changes in the law will to some extent produce uncertainty, as the House of Lords committee acknowledged, and the purpose of our guidance will be to identify these areas so that appropriate action can be taken in underwriting and drafting contracts.”
Once the Insurance Act has received Royal Assent there will be an 18 month transitional period before it comes fully into force.
About the IUA
The International Underwriting Association of London (IUA) represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members.
The IUA’s London Company Market Statistics Report shows that premium income for the company market in 2013 was £17.445bn with a further £6.831bn controlled by London but written elsewhere. These results are based on a comprehensive survey of 57 companies and combined give an overall intellectual and economic premium total of £24.276bn for the London company market.