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Member, Beacon International Group, Ltd.
LONDON -- The impending introduction of the euro has been the catalyst for the first joint contract wording clause for the London international insurance market.
The EMU (European Economic and Monetary Union) Continuity of Contract Clause, is the first time the London company market and Lloyd's of London have worked together on a contract clause wording.
Representatives of the London International Insurance & Reinsurance Market Assn. and the Lloyd's Non-Marine Assn. developed the wording.
The clause, which will be distributed to Lloyd's and company market underwriters under the reference LMW 0001, reads:
"The introduction of the euro shall not have the effect of altering any term of this insurance contract or of discharging or excusing performance under this contract, nor give a party the right unilaterally to alter or terminate this insurance contract."
Pam Byrnes, LIRMA clauses subcommittee secretary, said the clause aims to resolve uncertainty regarding new insurance contracts that come into force after Jan. 1, 1999 -- the launch date of the euro.
In a circular distributed to LIRMA members, Ms. Byrnes said European Union legislation states the introduction of the euro shall neither affect contractual obligations nor give a party the right to terminate a contract.
This legislation is part of the law of all E.U. member states, whether they participate in the euro or not.
However, Ms. Byrnes said uncertainty exists for contracts governed by the law of non-E.U. members.
"Generally, it is accepted that continuity of contract will not be affected by the introduction of a new currency," Ms. Byrnes said. "However, there can be no absolute certainty that all jurisdictions will apply this principle."
Ms. Byrnes said the clause should be used at the "underwriters' discretion."