BOURNEMOUTH, England—The Assn. of Insurance & Risk Managers has published a model clause it said it hopes will help corporate insurance buyers avoid uncertainties stemming from a 105-year-old insurance law.

During its Annual Conference 2011 in Bournemouth, England, AIRMIC said last week that a year of work went into devising the model clause to help risk managers avoid problems caused by the Marine Insurance Act 1906. The U.K. law is applied to many insurance contracts and can enable underwriters to avoid a claim because of inadvertent nondisclosure by buyers.

Under the law, insurance buyers are required to provide “all material information” that a “prudent insurer” might require—even if the insurer does not ask for the information and even if the information is not relevant to the claim.

At last year's conference, AIRMIC CEO John Hurrell said the matter had become an increasing concern for risk managers and that a “high percentage” of the association's membership had claims challenged on the grounds of inadvertent nondisclosure.

During this year's conference earlier this month, AIRMIC unveiled a model clause, drawn up with the help of London-based law firm Herbert Smith L.L.P. While voluntary, the clause is intended to give corporate insurance buyers and their advisers a template to follow to avoid the problems inherent in the Marine Insurance Act wording.

Alexander Oddy, a partner in the insurance and reinsurance litigation team at Herbert Smith, said the model clause is intended to “articulate in legally effective terms the needs of AIRMIC members.”

The clause “gives the policyholder comfort that their policy cannot be voided” in the event of nonfraudulent nondisclosure, he said.

Nondisclosure must be material

Among other things, the model clause states that if a policyholder or its agent fails to disclose, or misrepresents, a material fact before the inception of a policy, the insurer is entitled to challenge the claim if the nondisclosure is fraudulent or if it can show that it would not have underwritten the policy had the fact been disclosed before inception.

If the underwriter would have written the policy on different terms with disclosure of the information, the insurer would not be entitled to void the policy. Instead, the underwriter could charge an additional premium under the new clause.

Mr. Hurrell said insurers have been receptive. While AIRMIC did not expect wholesale adoption of the clause, he said the group hopes underwriters adopt it on a case-by-case basis.

Variations on the clause are likely to emerge, which Mr. Hurrell described as a “healthy thing.”

Among other initiatives announced by AIRMIC during the conference was a mentoring program intended to help young risk managers, who are paired with more senior colleagues in different companies.

Elaine Heyworth, a board member at AIRMIC and head of risk management at Hatfield, England-based telecommunications company Everything Everywhere Ltd., has overall responsibility for the program. She said she believes it would help the development of a new generation of risk managers.