What is a contract of insurance?
Produced in partnership with RPC
What is a contract of insurance?

The following Insurance & Reinsurance practice note Produced in partnership with RPC provides comprehensive and up to date legal information covering:

  • What is a contract of insurance?
  • The legislative background
  • Case law describing insurance contracts
  • The ‘insurable interest’ concept
  • What is the difference between a contract of insurance and a guarantee?
  • FCA regulatory guidance
  • The FCA's view of what arrangements constitute a contract of insurance
  • The FCA's principles of construction
  • Characteristics indicating that a contract is contract of insurance
  • Characteristics indicating that a contract is not a contract of insurance
  • More...

This Practice Note covers the legal framework and regulatory guidance to be considered in determining whether an arrangement constitutes a contract of insurance and the possible consequences of carrying on activities relating to a contract of insurance without the requisite regulatory permissions

The legislative background

Neither EU nor English insurance legislation provides a clear definition of a ‘contract of insurance’.

The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, SI 2001/544 (RAO) defines a ‘contract of insurance’ as ‘any contract of insurance which is a contract of long-term insurance or a contract of general insurance’. Contracts of general insurance are defined as any contract which falls within RAO SI 2001/544, Sch 1, Pt 1, classes 1–18 (such as property or motor insurance). Long term insurance is defined as any contracts which fall within RAO SI 2001/544, Sch 1, Pt II, classes I–IX (such as life assurance). However, this definition is circular unless one imports a definition of a ‘contract of insurance’.

Case law describing insurance contracts

A definition of a ‘contract of insurance’ has also not been provided by the EU or English courts. The European courts have provided a general description of a 'contract of insurance' which can be found in Card Protection Plan v Customs and Excise Commissioners Case C-349/96. The ECJ stated:

'… the essentials of an insurance transaction are, as generally understood, that

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