I INTRODUCTION

i The nature of the UK insurance and reinsurance market

The UK insurance and reinsurance industry is the largest in Europe and the fourth-largest in the world.2

Commercial insurance business in the UK is dominated by the 'London Market', which today is the world's leading market for internationally traded insurance and reinsurance.

The London Market has two strands: the company market and the Lloyd's market. It is primarily a 'subscription market' in which the broker plays a crucial role in producing business and placing risks with a variety of insurers willing to accept a share.

As its name suggests, the company market is composed of corporate insurers and reinsurers. It is organised through a market body, the International Underwriting Association, and operates principally out of the London Underwriting Centre building and its environs.

From its beginnings in a coffee house in 1688, Lloyd's has grown to be the world's leading market for specialist insurance. It is not itself an insurance company but rather a society of members, largely corporate but still involving some individuals, that accept insurance business through their participation in competing 'syndicates'. Each syndicate is administered by a 'managing agent' and makes its own business decisions, but Lloyd's provides both a physical location in which to carry out this business and a regulatory framework of rules with which the syndicates must comply. Lloyd's also manages the unique regime that protects the security underlying the Lloyd's market. Lloyd's accepts business from over 200 countries and territories worldwide.3

An important strength of the London Market lies in the number, diversity and expertise of the insurers and reinsurers writing business. Brokers can find the capacity and expertise required for the underwriting of virtually any type of risk. A key feature is the presence of highly skilled 'lead underwriters' whose judgements on the terms to be offered for different risks are followed by other insurers in London and overseas. Another important attribute is geographical concentration, with many insurers and intermediaries located in close proximity to the EC3 district, an insurance hub in the City of London. Thus, brokers have a personal relationship with the underwriters with whom they deal. Similarly, buyers of insurance can meet providers and market information is easily shared among participants.4

ii The legal landscape for insurance and reinsurance disputes

It is common for insurance and reinsurance contracts placed in the London Market to be governed by English law and subject to the jurisdiction of the English courts, or heard in London arbitration, even where, as is often the case, not all the parties to those contracts are UK companies. There are a number of reasons why London is a premier venue for insurance and reinsurance dispute resolution.

Perhaps the most important factor is the specialist judiciary who are familiar with the practices of the London Market. Disputing parties may expect that the judges of the Commercial Court (a specialist court, part of the Business and Property Court of the High Court of Justice, handling complex national and international business disputes), and indeed the appellate courts, understand, for example, what a 'slip' is and what roles are played by all involved in the placement of business in the London Market.

Secondly, England has a highly developed body of insurance and reinsurance case law. Court judgments create binding precedent, such that they can be relied on to determine future disputes. This means that parties can expect a fair and rigorous judicial system and a reasonable degree of predictability.

Arbitration continues to be a popular alternative to court proceedings (particularly for reinsurance disputes), in part at least because of its confidential nature. The pool of arbitrators available to deal with insurance and reinsurance disputes benefits from many of the same attributes as the court system, and parties can be confident of a fair resolution of the issues by arbitrators who understand them.

The English courts encourage the use of alternative dispute resolution, and in particular mediation, to settle insurance and reinsurance disputes.

II REGULATION

i The insurance regulator

Since 1 April 2013, the regulation of insurers and brokers (as well as other financial services providers) has been divided between two regulators: the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The PRA is responsible for prudential matters (e.g., regulatory capital) while the FCA is responsible for conduct of business issues (e.g., the distribution of products). Insurers are regulated by both the PRA and the FCA, whereas insurance intermediaries such as brokers are regulated only by the FCA.

The regulation of the Lloyd's market is more complex. Lloyd's managing agents are regulated by the PRA, FCA and Lloyd's itself. Lloyd's brokers and members' agents are regulated by the FCA and Lloyd's. However, Lloyd's members (who provide capital and participate in Lloyd's syndicates) are only subject to Lloyd's regulation. The Society of Lloyd's is regulated by the PRA and the FCA.

When the PRA and the FCA took over as the prudential and conduct regulators of the UK financial services industry, they each adopted distinct supervisory approaches. For dual-regulated firms such as insurers, the practicalities of working with two regulators have become clearer, although concerns continue to exist about the possible duplication of regulatory efforts.

On 1 April 2015, the FCA also became a 'concurrent regulator' alongside the Competition and Markets Authority (CMA) with 'concurrent powers'. These powers are in addition to its regulatory powers under Financial Services and Markets Act 2000 (FSMA) as amended by the Financial Services Act 2012. The FCA now has the ability to enforce the prohibitions in the Competition Act 1998 on anticompetitive behaviour in relation to the provision of financial services, together with investigatory powers under the Enterprise Act 2002, to carry out market studies and to make market investigation references to the CMA relating to financial services.

ii Principle of 'regulated activities'

There is no express prohibition on insurers or reinsurers. Rather, the UK regulatory regime prohibits the performance of regulated activities within the UK by unauthorised firms. These include insurer activities such as effecting and carrying out contracts of insurance, and distribution activities such as arranging, advising upon, selling and administering contracts of insurance.

It is a criminal offence to perform a regulated activity without being an authorised (or exempt) firm.5 Additionally, an authorised firm commits a regulatory breach if it does not have specific permission (or exemption) for a particular regulated activity that it performs.

Provisions in the legislation can deem regulated activities to be taking place in the UK (e.g., where there is a binding authority granted by an offshore insurer to a UK broker), and so care needs to be exercised by offshore insurers seeking to underwrite risks in the UK.

At the time of writing, the UK is part of the European Economic Area (EEA), and so EEA insurers and brokers authorised under one of the EU single market directives6 are able to 'passport' into the UK, on a freedom of establishment (branch) or freedom of services (no branch) basis, on the basis of their home state authorisation. The notification procedure that firms should follow when exercising their 'passporting' rights is set out in each single market directive. Subject to notification, such passports are, in effect, automatic, with the FCA having only a subsidiary regulatory role (conduct of business and marketing) with limited powers to block, or impose conditions on, an incoming EEA firm. Similarly, UK-authorised insurers and brokers are able to passport into other EEA Member States. One of the key advantages of passporting is that a regulated firm will have only one principal (home state) regulator, and for insurers this means only one regulatory capital regime. The role of the host state generally relates to the conduct of a regulated firm's business in the host territory. For pure reinsurers (whose insurance business is restricted to reinsurance) there is no requirement for notification, as the Solvency II Directive (2009/138/EC) (Solvency II) grants automatic passporting rights.

The UK's EU referendum in June 2016 saw the UK electorate vote to exit the EU (Brexit), and the triggering of Article 50 of the Treaty on European Union by the UK government on 29 March 2017, an action that may have significant impact on passporting rights. At the time of writing, the full outcome of the exit negotiations remains uncertain. However, it is clear that unless the passporting regime is retained in an agreement between the UK and the EU, UK insurers will lose their passporting rights either if the UK exits the EU with no deal or at the end of any transition period if a deal is agreed. The passporting rights of EU insurers into the UK will be similarly impacted. Even if certain passporting rights are retained, it seems inevitable that a major shift away from EU to UK regulation is likely (see Section VI).

iii Position of brokers

Insurance intermediaries such as brokers are also required to be authorised when they perform regulated activities and their rights to passport into the EEA will also change following Brexit.

iv Requirements for authorisation

A firm intending to carry on insurance or reinsurance business must obtain Part IVA FSMA permission from the PRA unless it is exempt or able to rely on the EU's passporting regime7. Such firms are required to meet a number of threshold criteria, primarily relating to geographic location, regulatory capital, and systems and controls. A condition of obtaining permission is that the threshold criteria must be satisfied on authorisation and must continue to be maintained. Most of these requirements are a function of EU law and may change following Brexit.

Brokers are required to meet very limited regulatory capital requirements, but are required to have professional indemnity insurance in place.

For both insurers and brokers, certain senior individuals will need to be assessed as fit and proper persons and able to perform senior management functions, and must be 'approved persons' (see subsection v).

Application for authorisation is made to the PRA for insurers, and the FCA for intermediaries (such as brokers).

v Regulation of individuals employed by insurers

Certain activities, such as being a director (including a non-executive director), or a chief executive (or a manager who can exert significant influence over the business) of an insurer or insurance intermediary such as a broker, are controlled functions, meaning that the appropriate regulator must approve an individual in that role. That 'approved person' is then subject to regulatory sanctions in the event of non-compliance. These sanctions can include financial penalties or restrictions on working in part or all of the financial services sector.

Additionally, the financial services legislation also extends to criminal offences committed by a regulated firm against its directors and officers, where the offence has been committed with the consent or connivance, or because of the wilful neglect of, such individual.

vi The distribution of products

The Insurance Distribution Directive (IDD)8 came into effect on 22 February 2016. EU Member States adopted and began to apply the measures contained in the IDD by 1 October 2018, and the Insurance Mediation Directive (IMD) was repealed.9,10 While the changes imposed by the IDD are less fundamental than those presented by Solvency II, the effects are more far-reaching as they capture both insurers and intermediaries distributing insurance products. Like Solvency II, there will be a raft of rules and guidance under the new regime.

The IDD was implemented with a view to harmonising insurance sales practices across Europe and ensuring consumer protection across all distribution channels from brokers to direct sales by insurers. The IDD imposes a range of obligations, for example product oversight, remuneration and information disclosure. The Brexit vote has led many to question whether the IDD will continue to be implemented in the UK. Currently, the position is that all directive requirements will be implemented or met until Britain's exit from the EU is effected.11 The FCA has further indicated that until any changes are made by Parliament, firms must continue to abide by their obligations under UK law, including those derived from EU law.12

vii Compulsory insurance

Within the UK, the principal compulsory covers are motor liability and employers' liability. There are also requirements specific to certain industries such as nuclear power, merchant shipping (pollution cover) and riding establishments. Aviation is subject to EEA rules on mandatory liability cover. The FCA requires insurance intermediaries such as brokers to have professional indemnity cover, and indeed many professions (such as the legal profession) require such cover as a condition of membership.

viii Compensation and dispute resolution regimes

If a regulated firm cannot resolve a customer complaint, then certain complainants – generally consumers, small businesses and some other small organisations – have the right to use the services of the Financial Ombudsman Service.

If a regulated firm is unable to meet its financial obligations, for example because of insolvency, then the Financial Services Compensation Scheme is available to compensate policyholders. However, the regime is generally restricted to consumers and small organisations – although there are important exceptions for compulsory insurance (notably employers' liability) where large organisations are also able to bring a claim. Compensation available under the scheme will also depend on the type of claim.

ix Taxation of premiums

Insurance premiums, for general insurance, are subject to insurance premium tax (IPT) where the risk is located in the UK. This also applies to overseas insurers covering a risk located in the UK.

The standard rate of IPT increased on 1 October 2016 from 9.5 per cent to 10 per cent and rose again to 12 per cent on 1 June 2017. Premiums that relate to risks for which the period of cover began before 1 June 2017 will be subject to IPT at the old rate of 10 per cent, provided that they were received before 1 June 2018. The higher rate of 20 per cent (applied to travel insurance, and some vehicle and domestic or electrical appliance covers) remains the same.

Reinsurance is exempt from IPT, as is insurance for commercial ships and aircraft, and insurance for commercial goods in international transit. Premiums for risks located outside the UK are not subject to IPT, but may be liable to similar taxes imposed by other countries.

Insurance premiums are exempt from UK value added tax (VAT), as are commission payments to brokers and insurance agents. However, the analysis is more difficult in relation to payments between entities in the insurance 'supply chain', such as introducers, and case law is still developing as to which of those payments are VAT-exempt and which are not.13 Her Majesty's Revenue and Customs has updated its internal guidance on tax, confirming that an introducer-appointed representative selling leads is not perceived to act as an intermediary and therefore is unlikely to be exempt from VAT.14

x Other notable regulated aspects of the industry

A purchaser of a regulated firm such as an insurer or intermediary requires prior consent from the appropriate regulator. It is a criminal offence15 to acquire or increase control in an insurer, reinsurer or intermediary without notifying and obtaining prior approval from the relevant regulator, which can lead to a fine and the transaction being held void. A purchase of a book of business from an insurer will require both regulatory and court consent under the UK's Part VII FSMA process. This is designed to work cross-border within the EEA to meet European requirements. In terms of the regulators, the PRA will be principally responsible for the process. However, the FCA also has an interest and will need to satisfy itself that, as a minimum, the transfer will not adversely impact the customers of the firms involved in the transfer.

Both regulators are able to make representations to the court during the transfer process. The PRA is also required to consult the FCA at the start of and during the transfer process. However, the transferring parties may find that the contribution of the two regulatory bodies to the transfer process could lead to more convoluted negotiations given the different objectives of the PRA and FCA. Therefore, early engagement with both regulators to agree a timeline remains key.

III INSURANCE AND REINSURANCE LAW

i Sources of law

The basis of insurance law lies in the general law of contract. Until August 2016, the most significant legislative provision in relation to commercial insurance was the Marine Insurance Act 1906 (MIA), which codified the case law as it existed at the time. In August 2016, however, the Insurance Act 2015 (IA15) came into force. This introduced the most significant changes to English commercial insurance law in over 100 years and swept away central provisions of the MIA (though parts of the MIA remain in force). IA15 applies to contracts and variations of contracts entered into on or after 12 August 2016. Most provisions of the MIA and IA15 apply equally to marine and non-marine insurance, and to reinsurance. Other relevant legislation includes the FSMA, which regulates financial services (including insurance), the Life Assurance Act 1774 (LAA) and, in relation to consumer insurance, the Consumer Insurance (Disclosure and Representations) Act 2012.

ii Making the contract

Essential ingredients of an insurance contract

Under English law, an insurance contract is an agreement by the insurer to provide, in exchange for a premium, agreed-upon benefits to a beneficiary of the contract upon the occurrence of a specified uncertain or contingent future event, affecting the life or property of the insured.

The distinguishing features of a contract of insurance are the transfer of risk and the requirement for an insurable interest. These are considered in more detail below.

The transfer of risk when the uncertain event occurs

The contract must be such that, when the insured-against event occurs, the insurer responds by bearing all or part of the risk. Often, this response will mean that the insurer pays money to the insured. However, the contract may set out that the insurer is to provide benefits in kind, rather than a monetary payment, such as the reinstatement of property damage,16 the cost of a hire car while the insured vehicle is repaired17 or the restoration of a computer network. A Supreme Court decision in 2013 established that the insurer may offer services of one kind or another, such as the repair or replacement of satellite television equipment.18

The insured-against event must be uncertain in its occurrence.19 This uncertainty is tested at the time that the contract is concluded.20 The element of uncertainty may relate to whether the event will occur at all (e.g., a house fire), how often or to what extent the event will occur (e.g., damage to taxis) or when a certain event might occur (e.g., death).

The requirement of insurable interest

There is no all-embracing definition of insurable interest. In practice, the requirement has generally been taken to mean that the insured must have a legal or equitable relationship to the adventure or property at risk, and would benefit from its safety or may be prejudiced by its loss. This can be an issue in particular in relation to complex forms of insurance-backed financial instruments.

Historically, indemnity policies have required the insured to have an insurable interest in the subject matter and policies without such an interest were seen as unenforceable (and deemed to be gambling contracts). The LAA and the Gaming Act 1845 created the obligation for insurable interest in non-marine indemnity insurance, and the MIA made insurable interest a necessity in marine insurance.

Uncertainty regarding the requirement for insurable interest was, however, introduced by the Gambling Act 2005. Under the terms of this Act, gaming or wagering contracts are now enforceable. This arguably removes the requirement for an insurable interest in non-marine indemnity insurance in English law. There is some debate, however, over whether the Gambling Act 2005 has abolished the need for insurable interest in marine insurance. Modern case law suggests that the courts will lean in favour of finding insurable interest where possible. It is obviously unattractive for insurers to take the premium and then deny the existence of an insurable interest. As noted by the Law Commission of England and Wales, 'the courts would make every effort to find an insurable interest where both parties have willingly entered into the contract'.21

The Law Commissions of England and Wales and of Scotland (the Commissions) have been undertaking a review of the law of insurance contracts. In June 2018, the Commissions published an updated version of the April 2016 draft Insurable Interest Bill. The Bill is designed to address concerns that the current law, described by the Commissions as unclear in some respects and antiquated in others, has had the effect of inhibiting the market's ability to write particular types of product for which there is a demand. The intention of the Bill is to ensure that such products can be made available without technical concerns about insurable interest. The Commissions are currently considering responses to the draft Bill and are expected to make their final recommendations in 2019.22

Utmost good faith

Unlike other commercial contracts, insurance contracts are contracts of utmost good faith, which imposes an obligation of 'the most perfect frankness' on the parties. For contracts entered into before 12 August 2016, the statutory basis for this is found in Section 17 MIA, which provides that '[A] contract of marine insurance is a contract based on the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.' This imposes an onerous duty on the party seeking insurance cover to disclose, before the contract is entered into, all material facts pertaining to the risk of which it is, or ought to be, aware, and to avoid misrepresenting any of the material facts.

Under the MIA a similar duty is imposed on the insured's placing broker.

Material facts are judged objectively, and are defined as those that would be likely to influence the judgement of a hypothetical prudent insurer in determining whether and on what terms to accept the risk, and in fixing the level of premium. In this regard, it is not necessary that a prudent insurer would have refused the risk, or even charged a higher premium, but enough to show that it would have liked the opportunity to consider the position.23 In the event of a material misrepresentation or non-disclosure, the insurer is entitled to avoid the contract from inception if it can demonstrate that the individual underwriter to whom the misrepresentation or non-disclosure was made was induced by that misrepresentation or non-disclosure to write the contract on the terms that he or she did.24

Following a lengthy review of British commercial insurance law by the Commissions, IA15 was passed in 2015 and came into effect on 12 August 2016. IA15 retains the name and concept of the duty of utmost good faith and amends Section 17 MIA to provide that 'a contract of marine insurance is a contract based upon the utmost good faith.' It introduces, however, a number of changes to the insured's pre-contractual duty. IA15:

  1. replaces the pre-contractual duty of disclosure and non-misrepresentation with a 'duty of fair presentation', whereby the insured is required to disclose all material circumstances about the risk or give the insurer sufficient information to put it on notice that it needs to make further enquiries for the purpose of revealing all the material circumstances about the risk. This puts a greater emphasis on the insurer to ask questions about the risk and to make clear what information it requires;
  2. replaces the single remedy of avoidance for breach of the duty with a system of graduated remedies based on what the insurer would have done had it received a fair presentation; and
  3. requires the insured to carry out a 'reasonable search' prior to the placement for material information available to it within its own organisation and 'held by any other person'.

Consumer insurance has already been the subject of similar reforms, as enacted by the Consumer Insurance (Disclosure and Representations) Act 2012.

Recording the contract

Insurance contracts are usually evidenced by a written policy, and Section 22 MIA and Section 2 LAA require a written policy. The London Market has also introduced the Market Reform Contract, a standard form that aims to increase contractual certainty and that is widely used in practice.

iii Interpreting the contract

General rules of interpretation

Insurance and reinsurance contracts are subject to the same general principles of construction that apply to other commercial contracts. The guiding principles are as follows.

Interpretation is the ascertainment of the meaning that a document will convey to a reasonable person having all the background knowledge that would reasonably have been available to the parties in the situation in which they were at the time of the contract.

The background knowledge has been referred to as the 'matrix of fact'. It includes anything that would have affected the way in which the language of the document would have been understood by a reasonable person. This is subject to two points: first, that the background knowledge should have been reasonably available to all the parties; and second, that the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent.

The meaning that a document would convey to a reasonable person is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammar; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.

The rule that words should be given their natural and ordinary meaning reflects the common-sense proposition that it is not easy to accept that people have made linguistic mistakes, particularly in formal documents. However, if it could nevertheless be concluded from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention that they plainly could not have had.

Incorporation of terms

Reinsurance contracts often contain general words such as 'all terms, clauses and conditions as original' or 'as underlying'. Such general words are not necessarily sufficient to incorporate a term from the insurance contract into the reinsurance contract. In HIH Casualty & General Insurance Ltd v. New Hampshire Insurance Co,25 the court held that a term will be incorporated only if it:

  1. is germane to the reinsurance, rather than being merely collateral to it;
  2. makes sense, subject to permissible manipulation, in the context of the reinsurance;
  3. is consistent with the express terms of the reinsurance; and
  4. is apposite for inclusion in the reinsurance.

By way of example, arbitration clauses, jurisdiction clauses and choice of law clauses are unlikely to be incorporated from an insurance contract into a reinsurance contract because they are not considered germane to the reinsurance. These provisions should, therefore, be dealt with specifically in the reinsurance contract. Similar principles apply to attempts to incorporate wording into excess layer contracts from the primary layer insurance.

Types of term in insurance and reinsurance contracts

Terms in insurance and reinsurance contracts may be divided into three broad categories: conditions, conditions precedent and warranties. Of these, the latter two require some comment.

Conditions precedent

There is more than one possible type of condition precedent in an insurance or reinsurance contract. A term can be a condition precedent to the existence of a binding contract, the inception of the risk, or the insurer's or reinsurer's liability. This is a matter of the wording of the particular clause. Whatever the type of condition precedent, there is no need for an insurer or reinsurer to prove it has suffered any prejudice before it can rely on a breach of the term.

A condition precedent to the contract must be satisfied, otherwise the contract will not come into being. A condition precedent to the inception of the risk presupposes a valid contract but one where the risk does not attach until the condition precedent has been met. A condition precedent to the contract or to the risk may, for example, relate to the provision of further information by the insured or reinsured or payment of the premium. Both types (in the absence of any specific wording) mean that the insurer or reinsurer cannot be liable for any loss that predates the fulfilment of the condition precedent.

A condition precedent to the insurer's or reinsurer's liability usually means that the insurer or reinsurer will not be liable for a claim unless the condition precedent is satisfied but the contract will generally continue in force. These conditions precedent are often concerned with the claims process. For example, the time period within which notification of a claim must be given is often expressed as a condition precedent to the insurer's or reinsurer's liability (as to which, see below).

The effect of a condition precedent to liability has been altered by Section 11 IA15. Under Section 11, if the condition precedent is, on its proper construction, one that would tend to reduce the risk of loss of a particular kind, at a particular location or at a particular time, insurers cannot rely on the insured's breach of the condition precedent to deny a claim if the insured can show that its breach could not have increased the risk of the loss that actually happened in the circumstances in which it occurred. The only exception to this is in relation to terms that 'define the risk as a whole' (e.g., a term that defines the age, identity and qualifications of the owner or operator of a vehicle, aircraft, vessel or item of personal property).

Warranties

An insurance warranty is not the same as a warranty in an ordinary commercial contract. For contracts entered into before 12 August 2016, the former is defined by Section 33(1) MIA as 'a promissory warranty, that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts'. A warranty is a way in which the insurer or reinsurer can procure from the insured or reinsured a guarantee of the accuracy or continued accuracy of a given fact or a promise that certain obligations will be fulfilled.

Under the MIA, the effect of a breach of warranty is to discharge the insurer or reinsurer automatically from liability as from the date of breach. The insurer or reinsurer is not required to show that the warranty was in any way material to the risk or that the breach has contributed to the loss. The severity of this remedy attracted considerable criticism from insureds and their brokers, and IA15 radically amended the law relating to warranties when it came into force in August 2016. Under IA15:

  1. A breach of an insurance warranty no longer automatically discharges insurers from further liability under the contract.
  2. Instead, the contract is suspended until the breach of warranty is remedied. Insurers remain liable for losses occurring or attributable to something happening prior to the breach but are not liable in respect of losses occurring or attributable to something happening during the period of breach. Once the breach is remedied, insurers are again liable for losses attributable to something happening after the breach (subject to the remaining terms of the contract).
  3. As noted above, under Section 11 IA15, where a loss occurs when an insured is not in compliance with a term that tends to 'reduce the risk' of loss of a particular kind, at a particular location or at a particular time, and that is not a term that defines the risk as a whole, the insurer cannot rely on that non-compliance to exclude, limit or discharge its liability if the insured can show, on the balance of probabilities, that its non-compliance could not have increased the risk of the loss that in fact occurred in the circumstances in which it did occur. The example given by the Commissions26 is that of a lock warranty in an insurance policy, requiring the hatch on a private yacht to be secured by a special type of padlock. Compliance with the lock warranty would tend to reduce the risk of a specific type of loss: loss caused by intruders. Under Section 11, breach of such a warranty would not suspend the insurer's liability for other types of loss, such as loss in a storm. However, if there was a break-in, liability would be suspended even if the special padlock would not have prevented it.
  4. 'Basis of the contract' clauses, whereby the insured's answers in a proposal form are converted into warranties in the policy, have been abolished. In the context of consumer insurance, basis of the contract clauses were abolished as a result of the implementation of the Consumer Insurance (Disclosure and Representations) Act 2012.

iv Intermediaries and the role of the broker

English law usually views an insurance broker as the agent of the insured for the purposes of placing an insurance contract. The essence of the relationship between the broker and the insured is one that gives rise to a number of fiduciary duties, including an expectation that the broker will put the insured's interests before its own.

Commission

Notwithstanding that the broker is the agent of the insured at placement, the commission or brokerage that it earns when an insurance contract is placed is usually agreed and paid by the insurer – often as a percentage of the premium.

Consistent with ensuring that brokers act in the best interests of their clients, English regulation places a strict prohibition upon additional payments that are contingent upon the amount of business or the profitability of the business being entered into.

The agent's duty of disclosure

For contracts entered into before 12 August 2016, the law on the duty of disclosure affecting brokers is contained within Section 19 MIA. This provides that a placing broker is required to disclose to the insurer every material circumstance about the risk to be placed that is known to it or that in the ordinary course of business ought to be known by, or to have been communicated to, it. When IA15 came into force in August 2016, this provision was repealed; now, the broker's knowledge is attributable to the proposer, insofar as it is reasonably available to it. The broker owes a professional duty of care to the proposer to ensure that it does not cause the proposer to be in breach of its duty to make a fair presentation. The only exception to this is that a broker will not be required to disclose material information that it acquired while acting as agent for a third party if that information is confidential to the third party.

v Claims

Issues frequently discussed in the London Market include claims notification and the role of the doctrine of utmost good faith in claims, the latter being the subject of a landmark Supreme Court decision in 2016.27

Notification

An insurance contract, particularly in liability classes, often requires the insured to notify a claim to its insurer in a particular way and within a particular time frame for the claim to be valid. Prompt notification is often stated to be a condition precedent to coverage under a policy, and failure to comply with the notification requirements can give an insurer or reinsurer a complete defence to the claim.

The specific terms of a notification clause are, of course, crucial. Liability policies will, however, usually require notification of a 'circumstance' that 'may' or 'is likely to' give rise to a claim. 'Circumstance' has not been judicially defined. 'Likely to' has been held to mean a 51 per cent chance of a claim.28 'May' means a circumstance that 'objectively evaluated, creates a reasonable and appreciable possibility that it will give rise to a loss or claim against the assured'.29 The Court of Appeal has also made clear that, unless the language of the clause particularly requires it, an insured is not expected to carry out a continuous 'rolling assessment' of a circumstance to monitor whether, what was initially something that was unlikely to give rise to a claim, mutates into a circumstance that is likely to give rise to a claim.30 Finally, the term 'give rise to a claim' requires a causal as opposed to a mere coincidental link between the circumstances notified and the ultimate claim.31

Other policies will require the notification of a loss. In this context, loss has been interpreted differently in two cases on very similar facts (RSA v. Dornoch32 and AIG Europe (Ireland) Ltd v. Faraday Capital Ltd33). Considerations of space preclude a detailed analysis of the difference between these two cases, but they demonstrate that the question of whether notification under any particular policy ought to be given is very fact-specific and where in doubt, legal advice ought to be sought at an early stage.

Good faith in claims

As noted above, insurance contracts are contracts of the utmost good faith. The duty of good faith is mutual and is not limited to the pre-contract negotiations. Nonetheless, the courts have preferred to use an independent common law remedy of forfeiture to regulate fraudulent claims. Until recently, forfeiture was the remedy in respect of any claim that was materially tainted by fraud, whether entirely false, exaggerated or involving a fraudulent device to 'gild the lily' of an otherwise genuine claim. In 2016, however, in Versloot Dredging BV v. HDI Gerling & Ors (The DC Merwestone)34 the Supreme Court (by a majority of 4–1) abolished the insurer's remedy of forfeiture for the assured's use of a fraudulent device to further an otherwise valid claim. In doing so, it overturned the Court of Appeal's judgment in the same case and decided that Lord Justice Mance (as he then was) had been wrong in The Aegeon35 in expressing the opinion that the public policy objective of deterring fraud in the insurance claims context warranted the forfeiture of a claim that had been promoted by fraudulent means, even though the claim was in all other respects valid.

While upholding the fraudulent claim rule in respect of fraudulently exaggerated claims, the majority considered it to be 'a step too far' and 'disproportionately harsh' to deprive a claimant of his or her claim by reason of his or her fraudulent conduct if the fraud had been unnecessary because the claim was in fact always recoverable. In a strong dissenting judgment, Lord Mance expressed the opinion that there was no distinction to be drawn between the deployment of a fraudulent device and the pursuit of a fraudulently exaggerated claim. In his view, forfeiture was proportionate in both cases, and justified by the public policy objective of deterring fraud in the insurance claims context.

IA15 seeks to clarify insurers' remedies for fraudulent claims. The statutory regime, which came into effect in August 2016, stipulates that, in the event of a fraudulent claim, the insurer will have no liability to pay the claim, and have the option, by notice to the insured, to treat the contract as having been terminated from the time of the fraudulent act (and to retain all of the premium); however, the insurer will remain liable for legitimate losses before the fraud.

Owing to the mutual nature of the duty of good faith, an issue also arises (at least in theory) as to whether poor claims handling practices can place an insurer in breach of duty. Prior to the coming into force of the Enterprise Act 2016 (EA16) on 4 May 2017 under English law punitive damages against an insurer or reinsurer were not available for breaches of this duty; nor could an insurer or reinsurer be made to pay compensatory damages for any losses caused by an unreasonable declinature of a claim or delay in processing it. From 4 May 2017, however, EA16 introduced a new Section 13A into IA15. This Section introduces an implied term into every insurance contract subject to English law entered into on or after that date to the effect that insurers and reinsurers must pay claims within a reasonable time. A breach of that term gives rise to a right to claim damages. However, there is a special one-year limitation period for such a claim; and damages will be subject to the usual criteria for assessing contractual damages, which are that the loss must have been (1) foreseeable when the contract was entered into; (2) caused by the breach of contract; and (3) not too remote; and also that (4) the insured must have taken all reasonable steps to mitigate its loss.

IV DISPUTE RESOLUTION

i Jurisdiction, choice of law and arbitration clauses

It is usual for the parties in their contract to submit to the courts in a selected jurisdiction to hear disputes arising between them. The parties may also agree that any dispute is to be determined by arbitration rather than in the courts by insertion of an arbitration clause. Arbitration may be favoured for a variety of reasons, but in particular, for confidentiality. English courts generally will uphold and enforce these choices.

ii Litigation

Litigation stages

Civil proceedings in the High Court are governed by the Civil Procedure Rules (CPR).36 Once proceedings have been commenced and written statements of a case filed and served, the litigation stages are as follows:

  1. case management conference: the judge will set down the pretrial timetable;
  2. disclosure: each party is under a duty to undertake a reasonable search for, and disclose to the other parties, documents on which they rely, those that adversely affect their own case and those that support the other party's case. This includes electronic documents. The duty is limited to those documents within the party's control. Those documents attracting privilege (legal advice, litigation) are not obliged to be disclosed. The duty of disclosure continues until proceedings have been concluded;
  3. witness statements (see below);
  4. expert reports (see below);
  5. trial; and
  6. appeal – an unsuccessful party may, with the permission of the court, appeal an order or judgment to a higher court.

Evidence

Witness evidence is provided by signed statements setting out the evidence a witness would be allowed to give orally at trial. If a party has served a witness statement and wishes to rely on the evidence of the witness at trial, the witness must be called to confirm their written evidence in court, and may be cross-examined by the other party or parties.

The court's permission is required if the parties wish to adduce expert evidence at trial. The expert's duty is to set out an independent, objective, unbiased opinion on matters within his or her expertise, arrived at without regard to the exigencies of the dispute or of either party's position in it, based on and taking account of all the factual evidence provided for their review. The expert's overriding duty is to assist the court (not the party who has undertaken to pay their fees). If a party puts an expert's report in evidence at trial, that expert may be cross-examined by the other party or parties to the case.

Costs

The default position in English proceedings is that the losing party pays the reasonably incurred, reasonable costs of the successful party. These costs are 'assessed' by the court and, in practice, only 60 per cent to 70 per cent of the costs actually incurred by the successful party is usually recoverable from the unsuccessful party.

The parties have the ability to alter a costs outcome early in the proceedings by utilising the mechanism afforded by Part 36 CPR. If a party makes an offer to settle (in the prescribed form) that is rejected by the other party but the other party fails to 'beat' the offer at trial then the declining party, even though ultimately successful at trial, will be liable for the offering side's costs (including interest) from the date of expiry of the offer.

The 'Jackson reforms', implemented on 1 April 2013, affect the conduct of litigation in general but focus mainly on costs management (and disclosure that drastically affects costs). In particular, the reforms introduced a further 10 per cent sanction payable by defendants who decline a reasonable offer.

Under the CPR, each party is required to submit a budget for the case to the judge at the case management conference for approval by the court, and the court may order the budget to be reduced or disallowed in certain respects. The parties are entitled to apply to the court for variations in the budget during the case if new developments justify additional expenditure.

In recent years there has been an increase in the provision of third-party funding, also known as litigation funding. This is where a third party, with no previous connection to the litigation, agrees to finance all or part of a party's legal costs of the litigation in return for a fee payable from the proceeds recovered by the funded litigant.

iii Arbitration

Format of insurance arbitrations

The Arbitration Act 1996 codified English arbitration law and will govern the terms of an arbitration unless the parties have determined different rules (by reference to the rules of a particular institution) are to apply. The International Chamber of Commerce and the London Court of Arbitration are examples of commonly used international arbitral institutions with their own independent rules to govern the proceedings. However, most insurance and reinsurance arbitrations are ad hoc.

Procedure and evidence

Many London arbitrators will follow Commercial Court procedure, particularly in relation to evidence. It is open to the tribunal, however, to adopt different rules, for example, the International Bar Association Rules on the Taking of Evidence in International Arbitration, which allow for each party to request specific documents or a category of specific documents that are reasonably believed to exist, and to be in the possession of another party with reference to how the particular documents are relevant and material to the outcome of the case.

Costs

In the absence of a particular provision or agreement between the parties, costs in a London insurance arbitration will usually be payable by the unsuccessful party on the same basis as in the courts. While arbitration can be quicker than litigation, there are also added costs to consider. A panel of three arbitrators (the tribunal) each charging hourly rates, compared with a judge who is effectively free (save for the initial court fee), will quickly add up. Further, on top of, inter alia, legal fees, experts' fees, administrative fees and arbitrators' expenses, the parties must supply and fund the venue.

iv Alternative dispute resolution

While the courts actively encourage mediation and routinely ask the parties whether they have considered it, they cannot 'order' mediation. Rather, they have the power to penalise the parties from a costs perspective if they believe settlement options have not been adequately investigated. Given the soaring cost of litigation, an adverse costs order can be grave, so a threat of this kind is substantial. Our experience is that parties to insurance and reinsurance disputes will usually attempt to mediate prior to trial. In addition, now that the amendment to IA15 has come into force introducing Section 13A (see Section III.v, above) so that insurers can be liable for damages for the late payment of claims, an insurer's failure to consider alternative dispute resolution is likely to be one of the factors taken into account in deciding whether a claim has been settled within reasonable time.

Various alternatives to litigation, arbitration and mediation have been devised over the years to fast-track a resolution and keep costs down. These include expert appraisal (early neutral evaluation), expert determination, final offer arbitration, mediation-arbitration and the structured settlement procedure.

V YEAR IN REVIEW

The past 12 months have seen some interesting developments in the regulatory and legislative landscape, as well as a number of significant judgments.

i Regulation

Solvency II

While Solvency II has been integrated well since being implemented in the UK on 1 January 2016, it continues to be the subject of adjustment at EU and domestic level. The European Insurance and Occupational Pensions Authority conducted a planned review of the regime and consulted on advice to the European Commission about changes to the Solvency II standard formula. On 9 November 2018, the Commission published for consultation a draft version of a Commission Delegated Regulation intended to amend the Solvency II Directive. There are several proposed amendments, including the simplification of burdensome elements of the capital requirement standard formula, and the alignment of the Solvency II standard formula with those rules that are applicable in the banking sector. The review is expected to be completed in the first half of 2019.

On 11 January 2018, the PRA also published a consultation paper (CP2/18) in which it laid out proposals to reduce the reporting obligations of firms falling within the ambit of the Solvency II regime (particularly in relation to smaller firms). A policy statement was published on 6 July 2018, containing the PRA's final policy following completion of consultation.37

GDPR

The EU General Data Protection Regulation (Regulation (EU) 2016/679) (GDPR), adopted in May 2016, became directly applicable in all EU Member States without the need for local implementing legislation on 25 May 2018. The GDPR is supplemented and tailored within the UK in the Data Protection Act 2018 (DPA18). The GDPR strengthens and unifies data protection for all individuals within the EU. It also addresses the export of personal data outside the EU. The changes create a number of issues for insurers. For example, customers are now entitled to ask their insurers to delete their personal data where it is no longer required for its original purpose or where they have withdrawn their consent. Following industry concerns, DPA18 was amended to allow for personal data to be processed where this is necessary 'for an insurance purpose'.38

The Senior Insurance Managers Regime

On 10 December 2018, the Senior Managers and Certification Regime (SM&CR) was extended to insurers through the Bank of England and Financial Services Act 2016. The SM&CR replaced the PRA's Senior Insurance Managers Regime, and the FCA's revised approved persons regime, extending to employees who are not necessarily senior managers but whose roles could potentially cause significant harm to the firm.39

ii Dispute resolution

The year 2018 did not provide any guidance from the courts on the construction and operation of the Insurance Act 2015. There were, however, a number of significant court decisions across all sectors of insurance. Some examples are outlined below.

In the liability sector, the always complex issue of notification was before the Commercial Court again in The Cultural Foundation and Abu Dhabi National Exhibition Company v. Beazley Furlong Limited and Others.40 The case involved a dispute between insureds, primary and excess insurers concerning which insurance policy and which policy year had been activated by a notification of circumstances likely to give rise to a claim. The case turned on its particular facts but the Court set out some general principles of interest. In particular, it confirmed that the question of whether there is a likelihood of a claim is an objective test from which it follows that a notification is only valid to the extent that the circumstances identified are such that a reasonable person would think they are likely to give rise to the subsequent claim. Further, the term 'give rise to a claim' requires a causal as opposed to a mere coincidental link between the circumstances and ultimate claim.

Interestingly, in his obiter (i.e., non-binding) comments, the judge also expressed the view that an insured may choose which insurance to claim under if it has made a valid notification to more than one policy (subject always to the specific wordings of the policies).

Liability insurers will also take note of the Court of Appeal's decision in Morrisons Supermarkets Plc v. Various Claimants,41 which appears to extend the scope of an insured's vicarious liability for the act of its employees. In this case, the Court held that an employer could be vicariously liable for an employee's actions, even though in this case the employee was guilty of a criminal act (for which he was sentenced to eight years in prison) and even though Morrisons itself was the target of the employee's action. Morrison's submission that an employer could not be vicariously liable for an employee's breach of the Data Protection Act 1998 was also rejected. Significantly, the Court found that the fact that insurance cover is available for losses of this nature meant that extending vicarious liability in this way would not impose an unjustified liability burden on businesses.

The Marine Market saw a number of important judgments addressing the interpretation of standard London market clauses. Perhaps the most well known of these was the Supreme Court's decision in Navigators Insurance Company Limited and others v. Atlasnavios – Navegação, LDA (B Atlantic).42 This case concerned coverage under a marine war risk policy in respect of a vessel that had been detained in Venezuela after drugs were found strapped to its hull. The ship was declared a constructive total loss and was abandoned to the Court. The owners made a claim in respect of the loss under Clause 4.1.5 of the Institute War and Strike clauses 1/10/83. Clause 4.1.5 provides cover in respect of loss caused by persons 'acting maliciously'. In finding that insurers were not liable for the loss, the Supreme Court concluded that malice in this context must be directed against the property insured, the owner or other personal property that could cause harm to the owner by damage to the insured vessel. In this case, however, the smugglers' decision to attach cocaine to the ship's hull was not done with any intention to cause damage to the insured and, consequently, did not constitute a malicious act and so cover was not available under the policy.

The Commercial Court also had cause to consider a standard marine policy wording in the case of Mamandochet Mining Limited v. Aegis Manging Agency Limited and Others43 in which underwriters sought to deny liability for a cargo loss in reliance on a standard form 'sanctions limitation and exclusion' clause. This provided that insurers would not be liable to pay any claim that 'would expose that insurer to any sanction'. The Court held that this exclusion would be effective only if the insurer could show that payment would more likely than not be prohibited by an applicable law; it was not enough to show that there was merely a risk that sanctions may be applied.

The proper construction of an all-risk cargo and storage policy was at issue in Engelhart CTP (US) LLC v. Lloyd's Syndicate 1221 and Ors.44 The insured in this case was the victim of a fraudulent transaction in which it agreed to buy copper ingots that did not in fact exist. It made a claim under its cargo policy and, in particular, under the container and fraudulent documents clauses of that policy. The container clause provided cover for 'shortages' (i.e. the difference between what was actually in a container and what should have been in it). In this case, however, the Court agreed with insurers that shortage should be given its normal meaning and that there could be no shortage of a cargo when there was no cargo in the first place.

RSA Insurance PLC v. Assicurazioni Generali45 addressed the issue of contribution between insurers and is an important decision for insurers with exposure to long-tail liability risk. RSA had paid an employer's liability claim in respect of an employee who had been exposed to asbestos while working for the insured. RSA then sought a contribution from another insurer, Generali, that had also provided cover to the insured during the period of the employee's exposure. Generali argued that the claim against it was time barred because it was a claim for damages for which the Civil Liability and Contribution Act 1978 stipulates a limitation period of only two years in contrast to the period of six years that applies to a claim in debt. The court agreed with Generali's defence and the case is an important reminder to insurers of the short time limit in which a contribution claim must be brought in these circumstances.

VI Outlook and Conclusions

i Insurance contract law reform

The first substantive court decisions on the interpretation of IA15 have yet to be published and it is to be hoped that in 2019 the courts will give guidance on, for example, the application of the new proportionate remedies for breach of the duty of fair presentation and the operation of Sections 10 and 11 IA15, which deal with the operation of warranties.

ii Impact of Brexit on insurance regulation

As at the time of writing, no agreement has been reached on the process of the UK leaving the EU and there is a possibility that this will happen with no formal withdrawal agreement in place.

Until the formal withdrawal of the UK from the EU, the legal and regulatory framework will continue as normal. As such, the UK will remain subject to existing EU legislation and any new EU laws coming into force prior to the effective date of Brexit. In addition, the UK government passed the European Union (Notification of Withdrawal) Act 2018, which, among other measures, transposes directly applicable EU legislation into UK domestic law in preparation for Brexit. Following Brexit, these laws may be repealed or amended as the UK Parliament sees fit.

The two principal areas of regulation likely to be affected by Brexit are passporting rights and Solvency II. It seems likely that UK-based insurers will lose their passporting rights when Brexit comes into effect and, in anticipation of that development, many insurers have established authorised branches or subsidiaries in another EEA country so that risks can be written on a passporting basis in that country. In addition, Lloyd's has established Lloyd's Brussels, which will be able to write business in the EEA that will then be fully reinsured back to Lloyd's syndicates in London. Insurers are also introducing 'contract continuity clauses' into their policy wording, which allow risks currently underwritten by a UK entity to be transferred to an EEA licensed insurer in the event of Brexit.

If Brexit pushes the UK to amend the Solvency II regime, it could have significant consequences for insurers; for example, a UK solvency regulatory regime may not be recognised as 'equivalent' by the European Commission under Solvency II.

On 20 December 2017, the PRA published a consultation paper (CP30/17) on the proposed regulatory framework for international financial services firms (insurers and intermediaries) wishing to carry on regulated activities in the UK post-Brexit. The consultation envisaged that, subject to the outcome of Brexit negotiations, EEA insurers and intermediaries would be required to apply for authorisation to undertake regulated activities in the UK. When considering applications from such firms, the PRA notes that its assessment is 'likely to be linked to, but not necessarily the same as, formal determinations of equivalence in respect of Solvency II'. The consultation closed in February 2018, following which a new supervisory statement was published,46 introducing new factors to be considered alongside the PRA's current requirements for third-country branch authorisation. Importantly, the consultation made clear that the existing passporting regime would remain unchanged until the UK withdraws from the EU. The UK government has also announced that, if necessary, there will be a prospect of legislating a 'temporary permission' regime, allowing relevant firms to continue operating for a limited period after Brexit.

It is evident that a number of challenges remain, including adapting to the post-Brexit environment while continuing to manage market conditions and ongoing pressure from the regulators. Inevitably, consolidation looks set to continue with insurers focusing on their core activities and disposing of their non-profitable books. It seems that Part VII transfer activity is set to continue.

iii Insurtech

Insurtech refers to the use of technology innovations designed to increase efficiency in the insurance market. Over the past couple of years, innovations such as automation have brought improvements around risk and quality. There is likely to be real momentum in 2019 in terms of the development and implementation of blockchain technology, virtual reality, robotics, artificial intelligence and the internet of things.

iv Summary

The insurance industry in England has undergone some of the most significant regulatory and legal reforms to affect it for many years. These changes have provided both challenges and opportunities for the London Market, whose strength historically has been built, inter alia, on its ability to adapt to change. The London Market appears to have embraced the rapidly changing landscape and many within it have begun setting their sights on growth.

The most interesting development will of course be the changes affecting insurance and reinsurance regulation following Brexit. At the time of writing, the future regulatory regime remains uncertain; although no laws or regulations have changed, the London Market is having to activate its contingency arrangements for a no-deal Brexit.


Footnotes

1 Simon Cooper and Mona Patel are partners at Ince Gordon Dadds LLP.

5 Section 19 FSMA.

6 The single market directives are currently the Alternative Investment Fund Managers Directive (2011/61/EU); the CRD IV Directive (2013/36/EU); the Insurance Distribution Directive (EU) 2016/97) (IDD); the MiFID II Directive) (2014/65/EU); the Solvency II Directive (2009/138/EC); the UCITS IV Directive (2009/65/EC); the Mortgage Credit Directive (2014/17/EU); the Payment Service Directive (2015/2366/EU) (PSD II); and the Second E-Money Directive (2009/110/EC).

7 Section 19 FSMA.

8 Directive on insurance distribution ((EU) 2016/97).

9 Insurance Mediation Directive (2002/92/EC).

10 The IDD has been transposed into UK law by the Insurance Distribution (Regulated Activities and Miscellaneous Amendments) Order 2018 (SI 2018/546) and the Insurance Distribution Directive Instrument 2018 (FCA 2018/25). The latter instrument amends the FCA handbook in order to give effect to the provisions of the IDD. The PRA has also made minor changes to its Rulebook by way of the PRA Rulebook: CRR Firms, Non CRR Firms, Solvency II Firms, Non Solvency II Firms: MIFID II Passporting and IDD Consequential Amendments Commencement Instrument 2018 (PRA 2018/2). Her Majesty's Revenue and Customs' (HMRC's) consultation paper regarding the transposition of the IDD (last updated 30 May 2018) states that until exit negotiations are concluded, the UK remains a full member of the EU and all the rights and obligations of EU membership remain in force. During this period, the government will continue to negotiate, implement and apply EU legislation.

11 HMRC's consultation paper regarding the transposition of the IDD (last updated 30 May 2018) states that until exit negotiations are concluded, the UK remains a full member of the EU and all the rights and obligations of EU membership remain in force. During this period, the government will continue to negotiate, implement and apply EU legislation.

12 FCA press release dated 24 June 2016, 'Statement on European Union referendum result'.

13 Westinsure Group Ltd v. HMRC [2014] UKUT 00452 (TCC); Riskstop Consulting Ltd v. Revenue and Customs Commissioners [2015] UKFTT 469 (TC).

14 VATINS5205 September 2014.

15 Section 191F FSMA.

16 Prudential v. Commissioners of Inland Revenue [1904] 2 KB 658.

17 Digital Satellite Warranty Cover Limited and another v. Financial Services Authority [2013] UKSC 7.

18 Scottish Amicable Heritable Securities Assn Ltd v. Northern Assurance Co (1883) 11 R (Ct Sess) 287, 303.

19 Scottish Amicable Heritable Securities Assn Ltd v. Northern Assurance Co (1883) 11 R (Ct Sess) 287, 303.

20 Department of Trade & Industry v. St Christopher Motorists' Assn [1974] 1 Lloyd's Rep 17, 19.20.

21 Reforming Insurance Contract Law: Issues Paper 10: Insurable Interest: Updated Proposals.

23 Container Transport International Limited v. Oceanus Mutual Underwriting Association [1982] 2 Lloyd's Rep 178 CA.

24 Pan Atlantic Insurance Limited v. Pinetop Limited [1994] 3 WLR 677.

25 HIH Casualty & General Insurance Ltd v. New Hampshire Insurance Co [2001] Lloyd's Rep IR 224.

26 In their July 2014 report entitled 'Insurance Contract Law: Business Disclosure; Warranties; Insurers' Remedies for Fraudulent Claims; And Late Payment'.

27 Versloot Dredging BV & Anor v. HDI Gerling Industrie Versicherung AG & Ors Lloyd's Rep IR 468.

28 Layher Ltd v. Lowe.

29 HLB Kidsons v. Lloyd's Underwriters and others [2008] EWCA Civ 1206.

30 Zurich Insurance Plc v. Maccaferri Ltd [2016] EWCA Civ 1302.

31 The Cultural Foundation and Abu Dhabi National Exhibition Co v. Beazley Furlong Ltd & Others [2018] EWHC 1083 (Comm).

32 [2004] Lloyd's Rep IR 826.

33 [2008] Lloyd's Rep IR 454.

34 ibid., footnote 27.

35 Agapitos v. Agnew [2003] QB 556.

36 In the Admiralty and Commercial Courts, where many commercial insurance disputes are brought, there is an additional Guide that supplements the CPR.

37 Policy statement 16/18.

38 See further – Lloyd's Market Association Bulletin LMA18-003-KK, available at www.lmalloyds.com/LMA/News/LMA_bulletins/LMA_Bulletin_2013/LMA18_003_KK.aspx (accessed 7 February 2018).

39 The final rules and guidance of the SM&CR are set out in FCA 2018/45 (Individual Accountability (Duel-Regulated firms) Instrument 2018).

40 [2018] EWHC 1083 (Comm).

41 [2018] EWCA Civ 2339.

42 [2018] UKSC 26.

43 [2018] EWHC 2643 (Comm).

44 [2018] EWHC 900 (Comm).

45 [2018] EWHC 1237 (QB).

46 International insurers: the Prudential Regulation Authority's approach to branch authorisation and supervision (SS2/18).