Whether Reinsurer Entitled To Avoid Treaty Because Of Alleged Misrepresentation/Non-Disclosure By Reinsured

The reinsurer claimed to be entitled to avoid two reinsurance treaties entered into with the defendant reinsured on the basis that the reinsured had failed to disclose loss statistics relating to the reinsured's book of inwards marine energy construction risks, and had also failed to disclose three incidents likely to result in claims under one of the treaties. The reinsured accepted that the past loss statistics were material but argued that they would not have influenced the judgment of a prudent underwriter because (a) energy construction risks are all unique (so that little or nothing is to be gained from considering past results achieved by the reinsured on the insurance of such risks), and (b) there had been a change of underwriter at the reinsured, who had a "much more rigorous" approach to the selection of risks. Much of the case turns on the particular factual evidence but one point from the case is of more general interest (especially in light of the upcoming changes being introduced by the Insurance Act, which will require an insurer to prove what he would have done had he known about the breach...