This statement calls for all insurance and reinsurance contracts to be finalised by the date a policy comes into effect. The statement also said that all insurance policies should be issued within 30 days of inception. The move follows the lead taken by the London Market initiative, which began in 2004, and has seen the complete implementation of the principle into business as usual procedures.
This measure has been undertaken in order to ensure all parties entering an insurance contract are fully aware of what is being agreed, avoiding any uncertainty as to what the policy actually covers and ensuring transparency at the time of contract inception.
It is expected that the move towards full contract certainty should lead to a reduction in the burden on courts, resulting from cases relating to insurance contracts in which the terms were not fully agreed, adequately communicated or finalised by the time of inception.
Failure to achieve contract certainty is especially common in the placement of large and complex risks as well as special lines of cover, often issued by the excess lines market and/or reinsurance providers. Given the nature and size of these risks, a move towards full contract certainty is beneficial to all parties since it reduces possible litigation costs arising from badly defined contractual terms and limitations.
