Lloyd's Maritime and Commercial Law Quarterly
THE ROLE OF THE SLIP IN MARINE INSURANCE LAW
Howard N. Bennett*
For centuries the London insurance market has issued cover on the basis of documents called slips, yet the precise legal properties of the slip continue to elicit controversy. This article investigates those properties against the background of the historical development of marine insurance law in the area of contract formation. In the process, the importance attached by the courts to commercial practice in the evolution of commercial law is demonstrated and the question is raised of the relationship between marine insurance law and general contract law.
In the London market, marine insurance or reinsurance is usually sought on behalf of assureds by brokers who approach underwriters1 with the risk detailed in the shorthand of the market on a memorandum of agreement called a slip. Usually the broker first approaches a “lead underwriter”, that is an underwriter with expertise and market reputation in coverage of the type of risk for which insurance is sought. The subscription of an eminent leader will render the risk more marketable to other underwriters. Following underwriters who wish to participate in the cover will subscribe to a certain percentage of the risk by initialling the slip indicating the desired amount. However, by virtue of the practice of the London market, the broker is entitled to continue collecting subscriptions even after the lines written on the slip total 100%. Once the broker closes the slip, there ensues automatically a proportionate reduction of each line so that the subscriptions total 100% exactly, a process known as “signing down”.2 In consequence, the broker will customarily give the leader a signing indication, a statement as to the total percentage subscription he intends to pursue. This permits the leader to judge accurately the size of line to which he needs to subscribe in order to obtain the desired slice of risk and premium after signing down. Generally, “the slip contemplates its eventual replacement by a policy of insurance … but subject to such deletions and additions as are indicated
* Lecturer in Law, University of Nottingham. I should like to thank Professor M.G. Bridge for his helpful comments on a draft of this article.
1. In the Lloyd’s market, strictly speaking insurance is underwritten by syndicates of names represented by underwriting agents. It is customary, however, to refer to such agents as if they themselves were the underwriters or insurers.
2. For judicial accounts of the formation process at Lloyd’s, see American Airlines v. Hope
[1974] 2 Lloyd’s Rep. 301, 304–305 (part cited infra, text to fn. 66); General Accident Fire & Life Assurance Corp. v. Tanter (The Zephyr)
[1985] 2 Lloyd’s Rep. 529, 531–532. However, contrast General Reinsurance Corp. v. Forsakringsaktiebolaget Fennia Patria [1982] Q.B. 1022, 1037–1038; [1982] 1 Lloyd’s Rep. 87, 97 (Staughton, J.), casting doubt on the universality of market acceptance of the signing down procedure.
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