A new Insurance Contract Act comes into effect in August 2016, impacting insurance contracts governed by the laws of England and Wales. Designed to reflect modern business relationships and the changing nature and diversification of risk, it is intended to rebalance rights and remedies when things go wrong.
The new act makes a number of changes to existing legislation. It places a duty on the insured not to make misrepresentations and to make a fair presentation of the risk. It also formalises the requirement to disclose every material circumstance which it knows or ought to know. Insurers must be given sufficient information to make further enquiries about a risk if deemed appropriate.
Under the new law, an insured is assumed to know what is known to its senior management and insurance purchasing teams. The duty of good faith remains, although a breach of this duty will no longer automatically entitle the insurer to void the policy (unless the breach is deliberate or reckless).
We recommend that organisations with insurance policies governed by the laws of England and Wales prepare by examining the information that they provide to insurers to ensure that it complies with the new act’s expectations. From a global perspective, while there is no immediate impact, the changes that have been put in place could filter out to other markets in the longer term given that they help to level the playing field for underwriters.
Our brokers are working with clients to ensure that the information that they are providing will meet statutory requirements.
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For further information, please contact Jay Payne, Senior Partner, Cargo, Specie and Fine Art team on +44 (0)20 7466 6236