How can each insurer's rateable proportion of a loss be calculated when applying the principle of contribution?

The correct approach to calculating each insurer's rateable proportion of a loss, when applying the principle of contribution, involves the use of the sum insured method in conjunction with the individual liability method.

The sum insured method focuses on the total amount insured under each policy. It allows for the calculation of how much coverage each insurer has provided relative to the total coverage in force for the same risk. Under this method, each insurer's share of any loss is proportional to the sum insured under its policy compared to the total sum insured across all relevant policies.

The individual liability method, on the other hand, closely examines the specific liability of each insurer based on the policy terms and conditions issued. It acknowledges that different insurers may have different shares of liability depending on the specific terms of their respective contracts, rather than merely their proportional contributions based on sum insured.

This combination ensures that the calculation recognizes the total coverage designed to protect against loss while addressing the specific obligations imposed by each insurer's policy.

In contrast, methods that incorporate terms like "application of average" or "independent liability" do not align with the correct interpretation of the principle of contribution and how insurers should proportionately handle liability in loss scenarios. These alternative methods lack the necessary specificity or do not constitute appropriate