CII LM1 flashcards
CII LM1 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Subscription market
- A market where a single risk is shared among several insurers, each accepting a percentage of the whole on identical terms, with a lead underwriter setting price and conditions.
- Lloyd's syndicate
- A group of members whose capital backs insurance risks, administered by a managing agent. A syndicate is not a separate legal entity and does not trade in its own right.
- Chain of security
- The order in which Lloyd's policyholder claims are met: syndicate assets, members' trust funds, the Central Fund, then other central assets such as the Members' Equality.
- Lead underwriter
- The underwriter who first assesses a risk and sets the terms, conditions and premium. Followers accept the lead's terms, and the lead often agrees claims on their behalf.
- Binding authority
- A delegated agreement allowing an MGA or coverholder to accept risks on an insurer's behalf within defined classes, limits, territories and referral rules.
- Market Reform Contract
- The standardised London Market slip format. It sets out risk details, information, conditions, exclusions, premium, security, signing provisions and broker remuneration.
- Signing line
- The record on a slip showing each insurer's percentage participation. The total must reach 100% for the risk to be fully placed.
- Duty of fair presentation
- The Insurance Act 2015 duty on commercial insureds to disclose every material circumstance they know or ought to know and to present information fairly and clearly.
- Proportionate remedies
- The Insurance Act 2015 approach to breach of the duty of fair presentation: remedies depend on what the insurer would have done, such as avoiding, applying different terms or reducing the claim.
- Deliberate or reckless breach
- A breach of the duty of fair presentation where the insured knew the information was material or acted recklessly. The insurer may avoid the contract and retain premium.
- Basis of contract clause
- A clause making all representations warranties. The Insurance Act 2015 renders such clauses of no effect for non-consumer contracts.
- Utmost good faith
- The common law duty of good faith underlying insurance contracts. For commercial insureds, the Insurance Act 2015 replaced the old disclosure duty with fair presentation.
- Consumer Insurance Act 2012
- Legislation applying to consumer insureds. It requires the insurer to ask specific questions and the consumer to take reasonable care not to misrepresent.
- Enterprise Act 2016
- Legislation implying a term that insurance claims be paid within a reasonable time, allowing damages for unreasonable delay in settlement.
- Fraudulent claim
- A claim made dishonestly. Under the Insurance Act 2015 the insurer may refuse it, recover payments already made, avoid the contract and retain premium.
- Proximate cause
- The dominant and effective cause of a loss. It determines whether the insured peril applies, especially where several causes operate together.
- Insurable interest
- A legal or equitable interest in the subject matter or a liability exposure. Without it, the insured cannot recover, and the indemnity principle limits recovery.
- Subrogation
- The insurer's right, after paying a claim, to stand in the insured's shoes and pursue recovery from third parties responsible for the loss, up to the amount paid.
- Contribution
- The equitable right of insurers covering the same loss to share it rateably, so that no insurer pays more than its fair share.
- Average
- A claims adjustment where the sum insured is less than the value at risk, reducing the claim in proportion to the underinsurance.
- Warranty
- A policy term whose breach suspends cover. The Insurance Act 2015 modified the effect for non-consumer contracts where the breach is not material to the loss.
- Condition precedent
- A policy condition that must be satisfied before the insurer's liability arises, such as notifying a claim within a stated period.
- Facultative reinsurance
- Reinsurance placed risk by risk, allowing the insurer to choose which risks to cede. It differs from treaty reinsurance, which covers a portfolio automatically.
- Proportional reinsurance
- Reinsurance where premium and losses are shared pro rata, such as quota share (fixed percentage) or surplus (layered share above a retention).
- Non-proportional reinsurance
- Reinsurance responding only above a retention, such as excess of loss or stop loss. It protects against large or aggregate losses.
- Bordereau
- A periodic statement of risks or claims declared to insurers under a binder or treaty. Accuracy and timeliness are contractual obligations.
- Claims control clause
- A clause giving the reinsurer the right to control the defence and settlement of a claim, often requiring notification before the insured admits liability.
- Cut-through clause
- A clause allowing the insured to claim directly against the reinsurer in defined circumstances, such as the insurer's insolvency or default.
- Fronting
- An arrangement where a licensed insurer issues the policy and cedes most of the risk to a reinsurer, retaining a small line and a fee.
- Client money rules
- FCA rules requiring brokers to hold client money in segregated accounts so it is protected from the broker's creditors.
- Terms of business agreement
- A document setting out a broker's authority, remuneration and the basis on which it acts for the client and the insurer.
- Sanctions limitation clause
- A standard London Market clause stating that no cover applies and no claim is payable where doing so would breach applicable sanctions.