Royal & SunAlliance (R&SA) is adding a special condition to contracts, giving it the power to make retrospective premium increases and change the terms and conditions to policies in the Republic of Ireland.
But copies of the document have circulated among dozens of UK brokers, creating the belief that it applies to the UK.
The document, seen by Insurance Times, is dated October 2001 and bears the R&SA logo. The only link with Ireland appears to be that it carries the name of Ken Norgrove, the commercial insurance manager for the company in Ireland. It does not give his job title.
It states it applies to "all commercial property, employers'/public liability, fleet and multi-risk policies".
It says: "The company may, at its absolute discretion:
1) apply a surcharge to the premium or rates to reflect additional reinsurance charges imposed on the company by its reinsurers and the insured undertakes to pay such surcharge on demand.
2) Alter the terms, exceptions and conditions of the policy to reflect:
a) any limitation imposed on the company by its reinsurers
b) any change in market conditions which has a material effect upon the scope of cover or indemnity provided by the policy or extent of risk subject to the company providing a minimum of seven days' notice of such alteration."
One broker, who asked not to be named, said his reaction on being sent the document was one of horror. He said: "This seems to be another example of insurance companies transferring their problems on to the broker. The impression was that it applied in the UK."
British Insurance Brokers' Association (Biba) chief executive Mike Williams said: "My first reaction when I saw it was that it could be a hoax.
"It's without precedent. In 30 years in broking, I've never seen an insurer in the UK invoke such a set of provisions and I would be extremely surprised if it would happen here. Brokers would be absolutely taken aback - they would be astonished."
He believed the company would consult with brokers before introducing such measures in the UK and, if consulted, Biba would oppose it.
A spokeswoman for R&SA in the UK said: "At the moment, this letter only applies to the Republic of Ireland. I can't say what's going to happen in the future."
The document gives the reason for the sweeping powers as the "dramatic effect on reinsurance prices and terms" resulting from the terrorist attacks in the US and subsequent upheaval.
It says the conditions apply to all renewals made in or after December, surcharges would be kept to a minimum and the provision will be lifted once the current uncertainty has lifted.
R&SA's Dublin head of special projects and public relations Patrick Nally said the document applied only to risks in Ireland and had been sent to a database of brokers with clients in the country. This included about six brokers in the UK.
The company would contact them and apologise that it was not made clear that the document applied only to Ireland.
The company has not yet identified how many policies will be affected, but it would apply only to certain types of policyholders with very large risks. "The number of policies it will affect will be extremely small," he said.
