Market reform contract
Standardized London market document carrying a risk's terms and collecting carriers' signatures, successor to the handwritten slip and basis of electronic placement.
In November 2004 John Tiner, chief executive of the Financial Services Authority, gave the London market until the end of 2006 to achieve contract certainty: too many risks were incepting before terms had been agreed. The Market Reform Contract came out of it in 2007. Before it, the market contracted on a slip, carried from box to box, on which each underwriter stamped and wrote its line. The slip left behind ambiguities that litigation exposed years later: terms referring to clauses not attached, uncertain order of precedence, contradictory handwritten notes. The MRC imposes fixed headings. Risk Details carries the cover, conditions and clauses; Information, what was disclosed to underwriters; Security Details, the list of carriers and their shares, which is security in the market sense; then the subscription agreement, fiscal and regulatory details, and broker remuneration. The contract certainty rule requires everything to be agreed before inception, with nothing left to fill in afterwards. London's electronic placing rests on this document of known structure.
The London market adopted the contract certainty principle following the British regulator's public intervention in 2004, which found that a large share of risks incepted before terms were settled. The standardized market reform contract that followed was rolled out from 2007, and it is today the native format of the market's electronic placement platforms.
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