Section 561 | Connected contracts

(1)An insurance contract is connected with another contract for the purposes of section 560 if conditions E and F are met—

(a)at the time when both contracts are first in force, or

(b)at any time after that time.

(2)Condition E is that one of the contracts was entered into—

(a)by reference to the other, or

(b)with a view to enabling or facilitating entry into the other on particular terms.

(3)Condition F is that the terms on which one of the contracts was entered into are significantly different from what they would have been if—

(a)it had not been entered into in anticipation of the other being entered into, or

(b)the other had not also been entered into.

(4)If—

(a)there is only one such significant difference in terms, and

(b)the contracts meet conditions A, B and C specified in section 560,

the difference may be disregarded in the following cases.

(5)The first case is where the difference is a reduction in premiums under the contract that is reasonably attributable only to the contract—

(a)containing a right to renew, or

(b)being entered into by way of renewal.

(6)The second case is where—

(a)two or more contracts have been entered into as part of a single transaction, and

(b)the difference is reductions in their premiums that are reasonably attributable only to the premium under each of them having been fixed by reference to the appropriate proportion of the combined premium.

(7)In subsection (6) “the combined premium” means the amount that would have been the total premium under a single contract relating to all the risks covered by the contracts.