Termination Of A Contract Due To Insolvency

The Government is consulting on plans to prohibit the enforcement of 'termination clauses' in favour of a supplier in contracts for the supply of goods and services where the clause permits the contract to be terminated on the ground that one of the parties to it has entered formal insolvency. It will still be possible to terminate for other reasons - for example, non-payment. The Government acknowledges that certain types of financial products and services represent special cases and that there are grounds for exempting such products and services – it is not yet known if insurance will be an exempted service. In any event, it is fairly unusual for an insurance policy to provide that it will be terminated in the event of an insured's (rather than an insurer's) insolvency.