Contract Usage Q&A

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2. What is the definition of the 1 November mandatory date for MRC usage?

Risks incepting on or after 1 November 2007 must use MRC.

3. Can MRC be used for motor business? Underwriters will not accept it. Can Lloyd's mandate it for use in this area?

Motor business which is not processed by XIS is exempt from MRC requirements. There is no intention to change this. Motor Fleet business which is processed by XIS should use MRC.

4. What format should declarations off lineslips take?

New MRC (or an MRS slip for the time being).

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5. Where a policy is not to be produced, how/where should we incorporate wordings into the slip?

The options are to present the full wording in the contract during the placing process or to use specific references to bespoke or model material. Any wording attached after placing is not insurer authorised unless specifically agreed.

6. How should we deal with deductions that the client needs to be informed of such as credits for prompt payment or renewal incentive bonuses payable up front?

Any deductions from premium that are directly related to the client need to continue to be shown within Risk Details, rather than under the heading Other Deductions from Premium" within Broker Remuneration & Deductions. Any such deductions (e.g. overriding commission, with-holding taxes) can be included under the "Premium" or "Conditions" headings as appropriate."

7. Do we need to include the word "Section" as part of the section headings within an MRC placing document?

No, the word "Section" need not be present .

8. Page 8 of the final guidelines does not now mention LPO208s, whereas the draft May 2007 version did. Are we still able to use the LPO208 for signing purposes? If so, where would this be attached on the new MRC?

Yes you can still use LPO208. This is not attached to the MRC as it is related to the closing and not placing.

9. Basis of Loss and Risk Location now appear to have been removed from the requirements. Have I read this right and they are no longer required?

Correct.

10. Where, physically, do we attach wordings and clauses to the new MRC? Do they need to be page numbered?

A model or registered wording can be referred to under Conditions, and may be attached. A bespoke wording must be attached and this may be placed at the back of the MRC.

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11. Where does the list of Insurer's signed lines have to be attached, and how should they be page numbered?

Any additional pages (i.e. signed lines schedule) may be added to the back of the MRC, with separate numbering.

12. How do we deal with faxed insurer agreement? E.g. where an overseas insurer is used, they will not see the original slip, but will be sent a copy on which they put their stamp/agreement, then fax back. How would this be incorporated within the MRC?

Their stamped agreement may be added after the London written lines, with separate page numbering as required.

13. If the wording, or clauses, used refer to "this policy" how do we handle this using the MRC? Do we need to say that it represents a policy document?

The meaning of "policy" is defined (see below), and we believe that this addresses this point.
Policy - (as defined in article 2 of the Financial Services and Markets Act 2000 (Meaning of "Policy" and "Policyholder") Order 2001 (SI 2001/2361)) as the context requires: a) a contract of insurance, including one under which an existing liability has already accrued; or b) any instrument evidencing such a contract.

14. Please can you provide me with a definition of what constitutes a "Market Reform Exemption"?

A Market Reform Exemption is where the client has specifically requested not to follow the format laid down.

15. Please confirm if the MRC format should be used for declarations to lineslips, even if the lineslip is in MRS format.?

Yes.

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16. Are Marine Open Cargo covers within scope?

Yes as for MRS scope.

17. By agreeing to a client copy MRC being sent to the client would we be assisting the brokers into not disclosing their commissions and open ourselves up to investigation from the FSA? Is there any where else on the slip where commission can be disclosed?

Typically, broker remuneration does not appear in an insurer approved evidence of cover that is designed for the client (e.g. a policy), so this position is unchanged by the introduction of a client version of the MRC.

Market Associations and individual firms have had the opportunity to contribute to the current FSA review and a pronouncement from the regulator can be expected in due course.

The IUA has recommended to its members either the retention of the Broker Remuneration section, or a suitable reference at the end of the Risk Details section to the clients rights to request broker remuneration details.

18. Should MRC be used for declarations off line slips?

Yes - see section 3.2 of the MRC guidance.

19. Is there an official name for the version of MRC sent to the client when it includes Risk Detail, Information, Security Details and details of signed lines?

There is no prescriptive term that all firms must use. In these Q&A and in other places, we have used the term "Client copy MRC" but brokers are free to use whichever term they think will best suit their clients.

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