Page 155 - M97TB9_2018-19_[low-res]_F2F_Neat2

Chapter 6 Reinsurance programmes 6/23

Definition
It starts with a definition of Contract Certainty as follows:
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.

Principles
The definition is supported by seven principles, as follows:
A. When entering into the contract:
The insurer and broker (where applicable) must ensure that all terms are clear and unambiguous by
the time the offer is made to enter into the contract or the offer is accepted. All terms must be clearly
expressed, including any conditions or subjectivities.
B. After entering into the contract:
Contract documentation must be provided to the insured promptly.
C. Demonstration of performance:
The insurers and brokers (where applicable) must be able to demonstrate their achievement of
principles A and B.
D. In respect of contract changes:
Contract changes need to be certain and documented promptly.
Where there is more than one participating insurer:
E. When entering into the contract:
The contract must include an agreed basis on which each insurer’s final participation will be
determined. The practice of post-inception over-placing compromises Contract Certainty and must be
avoided.
F. After entering into the contract:
The final participation must be provided to each insurer promptly. Reference copy for CII Face to Face Training Chapter
G. Where the contract has not met the principles: 6
The insurer and broker (where applicable) have a responsibility to resolve exceptions to any of the
above principles as soon as practicable and without undue delay.

In relation to each principle, an explanation is followed by detailed guidance on its implementation.
There are also three appendices containing guidance regarding subjectivities and signing provisions,
and a checklist. In this way, the Code seeks to eradicate insofar as possible the uncertainties associated
with the parties contracting on the basis of a price and the principal terms now but leaving the detail
until later.
The reinsured is able to see immediately what protection it has bought, the reinsurer will have a clearer
view of its exposure and any broker involved in the transaction will reduce its legal, fiduciary and
operational risks. Of course, if agreed, that detail will not satisfy everyone all of the time. There will
always be differences of opinion and the potential for coverage disputes. Nonetheless when first
introduced the approach represented a vast improvement on prior market practices.

C3D Confirming placement

Once the placement of reinsurance has been completed, evidence of coverage should be given to the
reinsured as soon as possible.
Full details of the coverage and its terms and conditions will be set out to enable the reinsured to check
Full details of
that the cover has been arranged in accordance with its instructions and for any discrepancies to be coverage and terms
explained and resolved (if necessary). This is particularly important if the cover had been arranged and conditions are
set out
through a reinsurance broker. If not a copy of the MRC (in whole or in part), the broker will issue its own
document evidencing the terms of the cover it has placed. Such a document is usually described as a
cover note, and should be signed by a director or senior executive of the company, as it is confirmation
of the contract of reinsurance that has been effected.
The MRC standard provides that, when providing a copy of the contract to the reinsured, the risk details,
information and security details sections should always be retained in full. A schedule of signed lines
may be added but, if there are any changes to those sections, the document becomes a broker insurance
document (BID).