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A related clause is the London Market severe inflation clause (CA2003/SIC03). This clause, as the title
suggests, only responds in the event of severe inflation. For the limit and deductible to be adjusted, the
index must have increased by a specified percentage of the base index. This result is achieved by
replacing ‘base index’ with ‘base index times 1.25’ so that only increases in excess of 25% are taken into
account. On the other hand, the clause may operate as a franchise applying the full value of the increase
in the index above a specified figure.
A copy of the London Market Index Clause (IUA 02-014) can be found in appendix 7.3, which is available
on RevisionMate.

Question 7.9
In the worked example above, how much is recoverable from reinsurers if the index had risen only to 140?

D10B Aggregate extension clause (AEC)
This clause allows a reinsured to present as one loss, for the purposes of the reinsurance contract,
separate and unrelated losses which it covered on an aggregate basis under the terms of the original –
usually products’ liability – policy.

The operative part of the clause provides:
If required by the Reinsured this Agreement shall be extended to cover on an aggregate basis that liability
which the Reinsured incurs from any one risk for any one insured covering on an aggregate basis. The
Reinsured shall combine all their interests which emanate from the same original insured Policy to
comprise an original insured aggregate loss.

In short, the usual ‘each and every loss’ limit shall be deemed to apply ‘in the aggregate each original
insured aggregate loss’. The date of loss is taken to be the inception date of the original policy.

By way of example, it was common for US and UK product liability cover to be provided on an aggregate
basis (i.e. the limit of indemnity applies to all losses occurring in the period of insurance, irrespective of
the cause of loss or the number of products giving rise to a loss). The AEC allows all of the losses to be Reference copy for CII Face to Face Training
aggregated as one for the purposes of the reinsurance contract, thereby extending the aggregate basis of
the original cover to the reinsurance. In other words, the limit and retention of the reinsurance no longer
apply to each and every loss but to all losses in the aggregate arising from the same original insurance.
The clause also has the effect of changing the way in which losses attach to the reinsurance contract. As
7 Clause has the effect the date of loss is the inception date of the original contract, reinsurance contracts agreed on a ‘claims
of changing the way
Chapter in which losses attach made’ or ‘losses occurring during’ basis are, in effect, converted to a ‘policies incepting during’ basis.
to the reinsurance
The original contract must incept during the reinsurance period in order to be covered. In the mid-1980s
contract
following severe US liability losses, the AEC was largely replaced by claims series clauses.
D10C Claims series clause
This clause extends the cover provided by a casualty treaty to a ‘claims series event’, enabling all claims
Clause modifies
the ‘event’ from a specific common cause which involve one original insured to be aggregated for the purposes of
recovery. In this way, the clause modifies the ‘event’ (or similar) to cater for public and/or products
liability and professional indemnity policies. The standard clauses are known as TPX 1986 and TPX 1988
and the main elements of the latter are as follows:

• ‘Claims series event’ definition – for example, a series of claims arising from one specific common
cause which is attributable to one design and/or specification and/or formula in products and/or
services supplied by one and only one original insured.
• The statement that a ‘claims series event’ is deemed, for the purposes of the reinsurance contract, to
be an event with a date of loss (as determined).
• ‘Date of loss’ definition applicable to ‘claims made’ and ‘losses occurring’ policies:
– in relation to ‘claims made’ policies, the date of loss is the date the original insured is first advised
in writing of the first claim of the ‘claim series event’;
– in relation to ‘losses occurring’ policies, or a combination of ‘claims made’ and ‘losses occurring’
policies, the date of loss is the date on which the first loss of such a ‘claims series event’ occurred.
Be aware that the corresponding provision in the TPX 1986 is very different, namely, the date of
written notification by the reinsured to reinsurers of the possibility of a ‘claims series event’.