A February 2024 UK judgment dealt with the practices of the London insurance market and their Market Reform Contract (MRC) in relation to the role of a “slip” in the form of a slip policy or reinsurance slip. The practices may not be familiar to everyone. The question that always arises is what happens if a slip is issued without policy wording. The MRC is intended to cope with that.
The MRC is now the standardised form of agreement used in the London market. There is no longer supposed to be any reference to the “slip”. When a risk is presented by the broker to the market, the presentation consists of an introductory section setting out the most important details of the risk (which more or less corresponds to the old slip) but attached to this document is a schedule which sets out the terms of the policy. The effect therefore is that all documents are prepared up-front and when the underwriters scratch the documents, the contract is in its entire form.
This situation is intended to overcome the past debates where there was a cover note which still required agreed facultative certificates setting out the full and final terms of the reinsurances, and the facultative certificate superseded the slip terms if there was a conflict.
The court was dealing with the question which jurisdiction clause applied because there were clauses referring to English and New York jurisdiction. The court found that the slip policy/MRC was a binding contract at the moment it was issued. There was no requirement, on the face of things, for any further contractual document. The MRC identified all the necessary matters for a valid and binding contract including the jurisdiction clause, which provided for exclusive jurisdiction vested in the courts of England. Whether relying on market practice or the wording of the documents, the earlier agreement took precedent over the certificate. The documents provided that the RI slip would take precedence over the reinsurance certificate in case of confusion.
Where there is no proven market practice to rely on and no Market Reform Contract, insurers in South Africa, and elsewhere, will continue to have the debate in regard to the role of the slip where there is no policy wording attached. It will be a matter of evidence whether, in the case of renewal, the previous wording applied; or whether the parties, for instance, agreed that any subsequently negotiated policy wording would apply retrospectively. The best solution is always to have a full set of binding documents at the outset.