Four top insurance lawyers from London firm D J Freeman held a half-day seminar yesterday entitled `The London Market' for Bermuda's lawyers, accountants and insurance executives. The seminar was held at the Bermuda Underwater Exploration Institute.

The issues covered at the seminar were particularly pertinent for Bermuda's industry on three main counts: Bermuda law is based on English law; many Bermuda companies have offices or associates in London; many Bermuda firms do business with the UK and Europe.

David Kendall, head of D J Freeman's insurance department, was the first speaker and he addressed the duties and obligations of the insured in relation to claim matters. He said that all points he raised were as relevant to the reinsured as to those directly insured.

"Much attention is focused in English insurance and reinsurance law on the right of the insurer and reinsurer to avoid the contract of insurance for non-disclosure or misrepresentation at the time of placing. Arguably of greater importance is the application of English legal principles to the position post-contract.

"The business of insurance is the receipt of premium and the payment of claims, not the making of voidable contracts,'' he said.

He explained how common practice in the London market is for the initial risks to be brokered to underwriters on what are known as slips. These set out a summary of the main terms of the contract of insurance but are not the policy which is generally far more detailed.

"There is still uncertainty about where all the terms of the insurance contract are to be found,'' he said. But he explained that in most, but not all cases, once a policy is issued it supersedes the slip in law. He cited a variety of court cases that have helped construct the current case law on this and other relevant issues such as the duty to disclose, breach of terms, burden of proof and allocation of costs.

He concluded: "It can be surprising to those at the western side of the Atlantic how often fundamental questions of insurance and reinsurance law have not yet been addressed and resolved by the English courts.

While by application of basic principles of contract and insurance law it may be possible to work out how some of these issues should be resolved, there are other areas where more fundamental issues of public policy arise which ultimately only the courts and legislature can resolve.'' Ambereen Salamat, a specialist in non-contentious insurance work, spoke next about ways of exiting lines of business. She explained that a portfolio transfer will normally take about three months to complete and procedures are about to be reformed by the Financial Services and Markets Act 2000 which is expected to come into force this summer.

"The legislation relating to transfers has been reviewed so much over the past years that it has made the procedure very complicated and in need of reform,'' she said.

But she is not convinced the Act will solve all the problems. "In the Act many of the issues have not been addressed in primary legislation, so it may not be less complicated. However she anticipates these issues may be addressed as and when secondary legislation is produced.

"While the new procedure set out in the Act rationalises the different procedures currently in place, it also raises a number of issues. There is a suggestion that the Financial Services Authority may extend the new procedure for business transfers to the Lloyd's market. Again this will be effected by regulations and, at present, no details regarding this or any other requirements are available even though the Act is due to come into force in just a few months' time.

Interested parties can only follow carefully the actions of the Financial Services Authority over the coming months in the hope that they will provide the guidance needed in this area,'' she concluded.

Dorothy Cory-Wright, a specialist in insurance litigation, then addressed the seminar on the retention of confidentiality of documents and information. She opened with," It is no coincidence that many of the leading decisions in English law on the issue of confidentiality and its protection involve insurance companies.

"A key factor in the industry's choice of arbitration as a forum for resolution of disputes is the implied confidentiality which attaches to the existence of the arbitration, the evidence and documents produced in it and, most importantly, the award of the arbitrators,'' she said.

She went on to discuss confidentiality in three main areas: confidential documents and disclosure; confidentiality in arbitrations; confidential information and employees. She said a simple test as to what information is confidential, "is anything you would mark `confidential' and would not wish your business rivals, reinsurer's cedants, policy holders to have access to''.

Laying down the law She explained a foreign company can be affected by English law in several circumstances where an application can be made in court for documents held by a company's London subsidiary, an underwriting agent or broker, by the company through a subpoena in a local court or another company holding communication documents.

There are exceptions and ways around some forms of disclosure, Ms Cory-Wright explained, and she cited a number of court cases giving examples of how confidentiality had been handled. She also said the English courts will, in general, assist in every way possible to help retain confidentiality.

The fourth lawyer to speak was Richard Spiller, a specialist in non-contentious insurance law and an advisor to the insurance industry. He looked at recent developments in financial guarantee insurance in the London market and explained how this is a convergence between the finance market ( largely banks) and the insurance market.

"In the US they have comprehensive legislation governing financial guarantee insurance, but in the UK there is no statutory definition of financial guarantee insurance,'' he said.

He explained that Lloyds had prohibited the writing of this business since the 1920s. But now Lloyd's Financial Guarantee Insurance Regulation (1989) provides that a range of financial and economic risks can only be written with the prior written approval of the Council, which acts through the War, Civil War and Financial Guarantee Committee.

"Over the past two years Lloyd's has witnessed the dramatic drive by major reinsurers and investment banks to transfer credit and business risk from the banking and capital markets into the insurance markets. it is keen to take advantage of this development,'' he said.

He concluded: "Underwriters of this business need to ensure that, in giving up the protections accorded them by law, they have undertaken appropriate due diligence and fully understand the additional risks they are running. Provided that they are able to assess this risk and ensure that they are not being bet against, there are indeed rich pickings available to discerning underwriters.'' Ambereen Salamat returned to the podium as the final speaker to give a brief overview of the UK's General Insurance Standards Council -- GISC. Prior to its establishment some eight months ago the sale of insurance products had been regulated in the UK mainly by the Insurance Brokers' Registration Council, the Association of British Insurers and Lloyd's.

She said: "The GISC is clearly having a significant impact on those involved in the sale of general insurance. Although many aspects of the GISC rules simply reflect good business practice, others impose additional and new obligations to be complied with.

The impact of the GISC is far reaching. Not only will insurance companies and insurance intermediaries be caught by its rules, but the GISC is intending that its rules should apply even to those whose main business is not insurance, such as high street retailers.'' Photo By Tammell Simons Ambereen Salamat: English law and the insurance industry.

BUSINESS BUC