New UK Arbitration Act 2025: Potential Impact on Insurance Contracts

The Arbitration Act 2025 (the Act) came into force on 1 August 2025 and will apply to arbitration proceedings commenced on or after that date. As reported in the December 2024 (40th Edition) of Arbitration World E-magazine, the aim of the new Act is to supplement the existing framework, enshrined in the Arbitration Act 1996, by making various changes intended to ensure that the United Kingdom continues to be a leading destination for domestic and international commercial arbitrations. In the insurance context, there are important changes  likely to impact policyholders involved in insurance coverage disputes arbitrated in England, Wales or Northern Ireland.  

Why does it matter?

Many insurance policies provide for disputes between insureds and insurers, including in relation to the scope, applicability and quantum of the insurance cover, to be resolved by London-seated arbitration. This includes policies providing cover for risks arising in other jurisdictions. In practice, arbitration clauses are often found in standard form policy wordings but the precise terms vary from policy to policy, including (i) whether the arbitration is administered by an arbitral institution or is non-administered (ad hoc), (ii) the process for tribunal formation, and (iii) the law governing the policy.  

At the pre-contract stage, arbitration clauses are often given little attention, which can lead to inadequate, inconsistent or even conflicting dispute resolution clauses, within the same policy or within the layers of the insurance programme. Policyholders need to ensure that procedural ambiguities and inconsistencies are avoided because, if a coverage dispute arises, this will inevitably add to the time and cost of the resolution process.  

What are the key changes introduced by the Act?

In the insurance context, the following changes to the arbitration process are of particular importance and justify policyholders reviewing their policy wordings:

Law Governing the Arbitration Agreement

The Act has introduced a new rule regarding the law applicable to the arbitration agreement (i.e., the law governing the validity, scope and meaning of the arbitration clause itself). In particular, absent express agreement of the parties, the law of the arbitration agreement will be the law of the seat of the arbitration. This represents a departure from a key Supreme Court decision (Enka v Chubb [2020] UKSC 28) (previously reported by us here) which had decided that an arbitration agreement will usually be governed by the substantive law of the contract. In practice, it may still be beneficial to expressly agree what law applies to the arbitration agreement, particularly if the substantive law governing the policy differs from the designated seat of arbitration (e.g., it is not uncommon for insurance policies to provide for London-seated arbitration but with the application of a different substantive governing law, such as New York Law–as under so-called ‘Bermuda Form’ cover).  

The Arbitrator’s Duty of Disclosure

Building upon the Supreme Court’s decision in Halliburton v Chubb (in which K&L Gates represented the policyholder), the Act codifies and clarifies the arbitrator’s duty of disclosure. An arbitrator is under a continuing duty to disclose any “relevant circumstances” of which the arbitrator is or ought reasonably to be aware, and which “might reasonably give rise to justifiable doubts as to the individual’s impartiality in relation to the proceedings, or potential proceedings, concerned.” This duty of disclosure can be particularly important in the insurance context where insurers, in particular, tend to make repeat appointments of arbitrators drawn from a limited pool (often termed “frequent flyers”) because of their insurance expertise. Policyholders need to pay careful attention to arbitrator disclosures, recognising that some arbitrators may have determined (or be in the process of determining) similar coverage disputes involving the same issues, and even the same insurers. 

Introduction of Power to Make Awards on a Summary Basis

The Act gives arbitrator(s) the power to make an award on a summary basis in relation to a claim (or defence) or a particular issue, without a full arbitration hearing, if it considers that a party has no real prospect of success. Before making an award on the summary basis, the tribunal must give the parties a reasonable opportunity to make representations. In the insurance context, an application for a summary award may be appropriate for certain issues, such as policy construction or interpretation, where the case advanced is considered to be without merit. 

Practical considerations

Arbitration has long been favoured for certain classes of insurance, including marine, construction and ‘Bermuda Form’ cover purchased for catastrophic risks in North America. In recent years, arbitration has increasingly replaced English court litigation in other insurance contexts, including Professional Liability and D&O. In practice, there are pros and cons to this development, and policyholders need to consider what process is best suited to their requirements. For example, one benefit of arbitration is enhanced confidentiality, which may be important to policyholders where the subject matter of the claim is sensitive, or where reputational issues arise. When arbitration is chosen, the arbitration clause needs careful review, both for consistency with other clauses within the policy (and wider insurance programme) and to avoid ambiguity over the proposed forum, the procedure to be followed and the relevant laws to be applied. The Act gives policyholders a good opportunity to revisit these issues with their insurers.

Our market leading Insurance Recovery and Counselling practice group works closely with our renowned International Arbitration practice group to assist policyholders to optimise insurance outcomes and maximise recoveries on disputed insurance claims. If you would like to discuss how the Act may affect your business, please contact the authors direct.