In respect of commercial property insurance, when does insurable interest need to exist?

Insurable interest in the context of commercial property insurance must exist both at the inception of the policy and at the time of loss. This means that the insured must have a direct financial interest in the property at both these times.

At the inception of the policy, the insurer needs assurance that the policyholder stands to lose financially if the insured property is damaged or destroyed. This is a fundamental principle that helps prevent moral hazard, where an individual might deliberately let a loss happen if they do not have anything at stake.

Moreover, the requirement for insurable interest to exist at the time of loss ensures that the policyholder retains a financial connection to the property even when a claim is made. This connection is vital for the insurer to fulfill its obligation to compensate the policyholder for the loss, as it confirms that the policyholder would indeed suffer a financial detriment due to the loss. If the insured had no interest at the time of loss, they would not be adversely impacted, which raises questions about the legitimacy of the claim.

This requirement prevents situations where individuals could profit from a loss or where claims could be filed for property that they no longer have any stake in. Therefore, having insurable interest at both points solidifies the foundations of a fair and