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viii M97/February 2018 Reinsurance

Chapter 8 self-test answers

1. To make a fair presentation of the risk, the reinsured has a duty to disclose, amongst other things,
all that it ought to know. The Insurance Act 2015 defines this by reference to all that should
reasonably have been revealed by a reasonable search of information available to the reinsured.
2. Offer, acceptance, consideration, legality and an intention to create legal terms.
3. A party must show that such a term is necessary to give business efficacy (or effectiveness) to the
contract, is consistent with the express terms of the contract, and would have been agreed by the
parties.
4. It is a doctrine used as an aid to interpretation which provides that ambiguity is construed against
the drafting party.
5. A warranty is a contractual promise as to past or existing fact, or as to future conduct. On breach,
reinsurance cover is suspended until remedied (if it can be).
6. i. A common or unifying factor which can properly be described as an event;
ii. the event must be causative of the individual losses, satisfying the test of causation; and
iii. the individual losses must not be too remote from that event.

7. In relation to contracts, a limitation period is prescribed in s.5 of the Limitation Act 1980 as a six-
year period which starts on the date a cause of action accrues, during which proceedings to enforce
that cause of action may be commenced, and beyond which a court will not enforce that course of
action.
8. On the one hand, the reinsured does not want to have to (re-)agree each loss with its reinsurer and,
on the other, the reinsurer does not want to be bound to respond to all of the reinsured’s original
claim payments. Reference copy for CII Face to Face Training