Treaty wording

The wording is the contract document that gives legal force to a placement whose slip settled only the economics: scope, attachment, limit, premium and shares. It carries everything else, and everything else is what decides a claim: the definition of an occurrence, the hours clause, exclusions, reinstatement mechanics, governing law, arbitration, and the sanction for late notification. The problem it solves is the gap between the commercial deal, struck fast at the renewal table, and the legal deal, which takes weeks. Market practice long tolerated wordings signed months after inception, or never, leaving the parties covered by a document whose terms they had never discussed. That drift, exposed by the World Trade Center litigation of 2001, produced the discipline known as contract certainty, requiring a complete and agreed text before inception. A sound wording is not drafted at the claim: it is negotiated while no one yet has an interest in reading it one way.

The litigation arising from the attacks of September 11, 2001 turned on a question the slip did not settle: one occurrence or two. The answer was worth 3.5 billion dollars. Several policies and retrocessions had no signed wording, and the courts had to reconstruct the parties' intent from exchanged drafts. The UK Financial Services Authority imposed contract certainty in 2005, with a target of 85 percent of contracts complete at inception.

Wording, Texte du traité, Contract wording, Rédaction de traité