Market Reform Contracts/Contract Certainty

Market Reform Contract Contract Certainty Several Liability Clauses

Market Reform Contract

The Council has mandated through the Underwriting Requirements (paragraph 3A) that:

1.   Managing agents shall not permit the syndicate stamp of a syndicate managed by it to be affixed to any slip which relates to a contract or contracts of insurance unless:

a.   the slip is in the form of the Market Reform Contract and the information contained in the slip has been properly completed in accordance with the relevant London Market Group guidance;

b.   the slip has been marked “MR Exempt – Client Requirement”; or

c.   the slip relates to motor business, personal lines business or term life insurance business and the slip will not be processed by Velonetic.

2.   Managing agents shall not permit the syndicate stamp of a syndicate managed by it to be affixed to any slip which relates to a binding authority or to any line slip unless the slip has been completed in accordance with the relevant slip guidelines issued by the London Market Group.

3.   Managing agents can find details of the applicable guidelines and details of the Market Reform Contract on the London Market Group website.

Performance Management – Supplemental Requirements and Guidance, page 27

Contract Certainty

The contract certainty project began in December 2004 with an FSA challenge to the UK insurance industry to end the "deal now, detail later” culture. The industry took steps to improve the way it develops and agrees contracts ensuring that the insured has greater certainty over what it has bought and the insurer greater certainty over what it has committed to. Contract certainty has brought operational improvements across the Lloyd’s market and wider industry, reducing risk and improving service. Contract certainty applies to general insurance contracts either entered into by a UK regulated insurer, or arranged through a UK regulated intermediary. Contract certainty is achieved by the complete and final agreement of all terms between the insured and insurer by the time that they enter into the contract, with contract documentation provided promptly thereafter.

The Contract Certainty Code of Practice (reissued in September 2018) was produced by the Contract Certainty Steering Committee, a cross-market committee, and has been endorsed by all the UK’s leading insurance market bodies. All managing agents are expected to note and comply with the Code of Practice. Managing agents are further reminded that the Code of Practice requires that they should be able to demonstrate their performance in respect of Contract Certainty principles A & B (which set out the parties’ responsibilities when entering into the contract and after entering into the contract).

The Code of Practice can be downloaded from www.lmg.london.

Performance Management – Supplemental Requirements and Guidance, pages 27-28

Several Liability Clauses

It is of the utmost importance that all insurance and reinsurance documentation issued for or on behalf of underwriters includes an appropriate several liability clause. LMA 3333 in particular has been drafted for use by Lloyd’s underwriters and is suitable for use on all contracts.

In the case of binding authority business Lloyd’s has issued guidance which permits the use of alternative several liability clauses for combined certificates or where the risk is written solely by Lloyd’s underwriters. This guidance is set out in Market Bulletin Y4133.

The London Market Group website (www.lmg.london) includes a Several Liability Decision Chart showing which several liability clause should be used in each case.

Performance Management – Supplemental Requirements and Guidance, page 28