An uberrimae fidei contract is a legal agreement, common to the insurance

industry, requiring the highest standard of good faith during disclosure of

all material facts that could influence the decision of the other party. A
failure to adhere to uberrimae fidei is grounds for voiding the agreement.
Uberrimae fidei is also known as utmost good faith and is simply the Latin
translation of this phrase.
Uberrimae fidei or "uberrima fides" literally means "utmost good faith" in
Latin. It requires parties to certain contracts to exercise the highest
standard of full disclosure of any relevant conditions, circumstances, or
risks to their counterparties. Failing to disclose material facts that might
influence the other party's decision when entering into a contract where
uberrimae fidei applies can result in the contract being rendered null and
void and the other party being released from any obligations under the
contract.

Insurance contracts are the most common type of a uberrimae fidei

contract. Since the insurance company agrees to share the risk of loss
with the policyholder, it is imperative that the policyholder act in good faith
by fully disclosing all information that affects the insurance company's level
of risk. Full disclosure allows the insurer to protect itself by charging the
policyholder a premium that accurately reflects the level of risk it is
undertaking or even refusing to issue a policy if the risk is too high.

Uberrimae fidei is seen as the foundation of a reinsurance contract. In

order to make reinsurance affordable, a reinsurer cannot duplicate costly
processes, such as insurer underwriting and claim handling costs. They
must rely on the primary insurer’s ability to complete these tasks
adequately. In return, a reinsurer must appropriately investigate and
reimburse an insurer’s good faith claim payments. Uberrimae fidei is
considered an implied term in reinsurance contracts.