This book assesses the role of the doctrine of insurable interest within modern insurance law by examining its rationales and suggesting how shortcomings could be fixed.

Over the centuries, English law on insurable interest – a combination of statutes and case law – has become complex and unclear. Other jurisdictions have relaxed, or even abolished, the requirement for an insurable interest. Yet, the UK insurance industry has overwhelmingly supported the retention of the doctrine of insurable interest. This book explores whether the traditional justifications for the doctrine – the policy against wagering, the prevention of moral hazard and the doctrine’s relationship with the indemnity principle – still stand up to scrutiny and argues that, far from being obsolete, they have acquired new significance in the global financial markets and following the liberalisation of gambling. It is also argued that the doctrine of insurable interest is an integral part of a system of insurance contract law rules and market practice. Rather than rejecting the doctrine, the book recommends a recalibration of insurable interest to afford better pre-contractual transparency to a proposer as to the suitability of the policy to his or her interest in the subject-matter to be insured.

Providing a powerful defence for the retention of insurable interest, this book will appeal to both academics and practitioners working in the field of insurance law.


  1. Introduction

  • The historical development of the insurable interest requirement
  • Formative period

    Insurable interest under the lex mercatoria and common law

    Wager and wager policies

    Early legislation

    The Marine Insurance Act 1746

    The Life Assurance Act 1774


    The Gaming Act 1845

    The Marine Insurance Act 1906

    The Gambling Act 2005


  • The legal bases for insurable interest
  • Legal bases

    Marine property

    Non-marine goods

    Buildings and land

    Profit and future income



    Debtor’s property and debtor’s life



    Timing and consequences of lack of insurable interest

    Marine insurance

    Life insurance

    Non-marine goods, buildings and land, and liability insurance

    Defence of lack of insurable interest

    The courts’ strategies to "lean in favour of an insurable interest"

    The defence of lack of insurable interest and good faith

    Waiver and assignment

    Marine insurance

    Life insurance

    Non-marine property insurance


  • The meaning of insurable interest
  • Property insurance

    The classic definition of insurable interest

    Expanding the meaning of insurable interest

    Expanding insurable interest to pervasive interests

    Pervasive interest –v- legal interest test –v- moral certainty test

    Has the notion of pervasive interest become obsolete?

    Life insurance

    Pecuniary interests

    Presumed interests

    Statutory extensions

    A new approach to insurable interest: Feasey

    The principles


    Ward LJ’s dissenting judgment

    Reception and analysis


  • Insurable Interest – Quo Vadis?
  • The LC’s proposals

    The case for reform of the doctrine

    The IIB

    Would the IIB address the issues identified?

    Academic debate

    Examining the Traditional Justification


    Retention and expansion


    Foreign law approaches


    US / New York



    South Africa

    People’s Republic of China

    Themes for reform


  • The anti-wagering justification
  • Wagers and insurance distinguished

    Doctrinal distinction

    Economic analysis

    Public policy and the differentiation between insurance and wagers

    Policy on gambling

    Policy on insurance

    Reasons against gambling by insurers

    Dividing line for tax treatment

    Dividing line for takaful insurance

    Policy against wagering under the guise of insurance

    Sham transactions


    Unintentional wager policies

    Contracts of insurance differentiated from CDS

    What are CDS?

    CDS and insurance contracts distinguished

    Restraining effect of insurable interest requirement

    The anti-wagering justification and the definition of insurable interest


  • The moral hazard justification
  • Historical background and economic analysis


    Doubtful deterrent effect

    Reverse moral hazard

    Inappropriateness of contract law

    ‘Skin in the game’ in property insurance

    How does an insurable interest constitute skin in the game?

    Relationship with other anti-moral hazard techniques

    Relationship between insurable interest and moral hazard restated

    Moral hazard in the capital markets

    Moral hazard and STOLI

    Moral hazard and the definition of insurable interest


  • The indemnity justification
  • The indemnity principle


    The relationship between the doctrine of insurable interest and the indemnity principle

    The indemnity justification and the definition of insurable interest

    Indemnity dependent on nature and extent interest

    Multiple claims



  • The integral dimension of insurable interest – insurance contract law
  • Utmost good faith and pre-contractual risk presentation

    Utmost good faith

    Pre-contractual risk presentation under the IA 2015

    Pre-contractual representations under CIDRA


    No interest

    Economic interests

    Consequential loss

    Duty to mitigate loss

    Duty to prevent, avert and mitigate loss

    Reasonableness and insurable interest

    Failure to mitigate as an intervening cause



    Relationship with the doctrine of insurable interest

    Rights of action against third parties

    Significance of abandonment and subrogation


  • The integral dimension of insurable interest – policy terms
  • Methodology for survey

    Insurable interest and title requirements

    Clauses requiring loss and exclusion of consequential loss

    Retention, deductibles and limits of liability

    Loss prevention and loss mitigation

    Risk Control Terms

    Notice of loss

    Claims conditions

    Basis of settlement (reinstatement and repairs)

    Subrogation provisions

    Insurable interest as part of contractual fabric


  • The definitional dimension of insurable interest
  • Historical background to definition of ‘contract of insurance’

    Doctrinal analysis of definition of ‘contract of insurance’

    Interest –v- insurable interest in property insurance

    Definition for regulatory and tax purposes

    Conceptual analyses

    Abraham’s four conceptions of insurance

    Merkin and Steele’s models of insurance

    Insurable interest and market perception

    Definitional role

    Economic interest

    Reconciliation between definitional and validity roles

    Route A: contracts with ‘interest’ but without ‘insurable interest’

    Route B: non-insurance contracts under the guise of insurance

    Consequences of falling outside definition

    Consequences for policyholder

    Consequences for insurer


  • Remedies, enforcement and reform
  • Evaluation of remedies regime


    Effectiveness and enforcement

    Interference with the parties’ contract

    Remedial gap between legal consequences and regulatory sanctions

    Authorization and permissions

    Prudential regulation

    Conduct of business regulation


    Insurers’ duties in relation to insurable interest

    Suggested wordings

    The duty to decline

    A regulatory product information requirement

    Legal bases for the duty to decline and the regulatory product information requirement

    Benefits and detriments


  • Conclusion