IntroductionThe financial director of a holding company that has several specialized operating subsidiaries wants a single set of policies underwritten by the holding company to cover all subsidiary risks. One of these subsidiaries is a shipping operation operating out of the Port of Durban and which owns a vessel valued at R20 million. The theory surrounding the fundamental principles of insurance, namely indemnity insurance, materiality, duty of disclosure and insurable interests, will be discussed. Subsequently, the concepts mentioned above will be applied to the report in question. In addition, the outcome of Lorcom Thirteen (Pty) Ltd v Zurich Insurance Company South Africa 2013 54/08 [the Lorcom case] as well as Manderson t/a Hillcrest Electrical v Standard General Insurance Co Ltd 1996 (3) SA 434 (D) [the Manderson case] will be used to support this argument. Finally, the CFO will be advised on the appropriate set of policies for the holding company regarding subsidiaries. Indemnity Insurance Compensation is the most important principle of short-term insurance law. The principle of compensation provides that the actual loss of the insured is compensated by the insurer. The purpose of compensation, as expressed in the English case of Castellain v Preston (1883) 11 QBD 380 (CA) 386, is to restore the insured to the position quo ante. Indemnity insurance relates to the property or liability of the insured to a third party in respect of damage caused to that third party by way of loss or damage to property. In Manderson, the plaintiff owned an electrical company specializing in building wiring. He hired an independent contractor to repair the domes......middle of paper......to gain exposure. Thus, by having a single set of policies governing various operating subsidiaries, the CFO may not have knowledge of all the circumstances of each subsidiary and failure to do so could be to the detriment of the holding company when it claims loss or damage. Conclusion The judgments and principles mentioned above indicate how the courts have approached the concept of insurable interest in determining whether an insured should be compensated or not. Based on the facts of the case at hand and the request of the CFO, it may be suggested that a single set of policies governing the various operating subsidiaries of the holding company is not recommended as there is a risk that all the risks are not taken into account. assured. It is advisable for the financial director to instead have individual policies for each subsidiary..