What does Contract Certainty mean? Read on to discover the definition & meaning of the term Contract Certainty - to help you better understand the language used in insurance policies.
The London Market utilized a Contract Certainty Code of Practice, which was created by its Market Reform Group. Essentially, the idea of contract certainty is that each party will know exactly what the product is that is being sold at the time it is being sold, so it can be priced correctly and so the purchaser knows exactly what it is buying without any later misunderstandings. Now, under contract certainty, terms "to be agreed" have to be agreed by the inception date of the reinsurance contract. In the United States, contract finality or certainty has not yet been imposed to the level of the London Market Code of Practice for Contract Certainty. The 9-month rule, which really comes out of Part 23 of SSAP 62, requires that the reinsurance contract be finalized reduced to written form and signed within 9 months after commencement of the policy period but allows the contract to incept before the contract is finalized.
We hope the you have a better understanding of the meaning of Contract Certainty.