Infringements of the regulations are excluded under the Institute of War and Strikes Clauses (4.1.5) and other versions. In Sunsport Shipping Ltd and Others v. Atkins and Others (2003) the term ‘customs regulations’ was held wide enough to include provisions having the force of law in the country concerned as to: (a) import or export duties or licences and (b) import or export of controlled drugs and other prohibited goods, substances or materials. The words cover any law in the realm of customs and so include smuggling of prohibited goods as well as smuggling of goods subject to duty. The law extends beyond duties on imports to include criminal law. The insured’s ship, upon which cocaine was discovered, was detained long enough (in excess of six months) for it to be deemed a constructive total loss within the policy. The Court of Appeal held that the exclusion applied and the insured’s claim therefore failed.

When a continuous contract is terminated under the cancelling clause, the existing risks under the treaty may run-off or simply become cut-off. Run-off means that the reinsurer’s liability under policies current at the cancellation date continues until each policy expires. Cut-off means that the reinsurer will not be liable for losses occurring on or after termination. The insurer usually returns the unearned premium portfolio unless the treaty is written on an earned premium basis. See CLEAN CUT BASIS.