A buyer with an interest in cargo that is in transit may arrange a policy supplementary to the cargo insurance. This will be worded to pay as cargo’ for an increased value as the amount under the cargo policy may be inadequate to protect the buyer’s interest. The phrase means that the supplementary policy will contribute pro rata to any claim paid by the primary insurer. See INCREASED VALUE.

A reinsurance clause term indicating that the reinsurer will follow claims paid on the original policy but only in so far as the reinsured is legally liable to make the payment.

1. Form of total loss only reinsurance of: (a) vessels over or between specified tonnages; or (b) aircraft over or between specified hull values and/or seating capacities. The policies are effected on policy proof of interest without the benefit of salvage to the insurer. 2. An aviation reinsurance under which the reinsurer agrees to pay a fixed amount if an air crash results in a stated number of deaths.

A method of distributing bonuses to ‘with profits’ life insurance policyholders which has been used in the US but not in the UK. There are variations but the general principle is that declared surpluses are retained for ultimate distribution to the policyholders who survive a certain fixed period.

Risk arising out of the use of a special type, such as a mobile digger, as a tool of trade, i.e. used for its intended function, digging, lifting etc. This risk is distinguished from the road risk necessitating compulsory third party motor insurance. Tool of trade risks are of a third party nature, e.g. liability for damage to underground cables, and insurable under commercial motor, public liability or engineering insurances.

London’s second largest fire (1861) is a landmark in the development of fire insurance. It highlighted inadequacies in both the method of pricing fire insurance and fire-fighting arrangements. Differential rates of charges were introduced to penalise unsatisfactory features and reward favourable ones.

Drop down cover means the unexhausted limit of the top layer of excess of loss cover drops down to a stated lower layer(s) to respond to further losses when that layer is exhausted. The reinsured uses a back up policy to cover the risk of the top layer itself being exhausted by an earlier loss. The risk can be mitigated by not combining too many layers in one top and drop arrangement when the total amount of cover is limited. Top and drop may be whole account or class specific. Dropping to the bottom of the programme is termed ‘cascade’. Top and step is a variation, the top layer only drops to reinstate the immediate underlying layer.

A major disaster that alerted all countries to the risks and dangers of oil pollution. On 18 March 1967 the Torrey Canyon (a Liberian oil tanker) went aground 24 kilometres north east of the Scilly Isles liberating her cargo of crude oil. On 24 March 1967 there was a 64 kilometre long oil slick with an average width of 16 kilometres off Lands End. The Merchant Shipping (Oil Pollution) Act 1971 was passed in order to make oil pollution insurance compulsory for certain tankers.