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Recovering from Reinsurers
V Russian Insurance and Reinsurance Rendezvous
Andrew Tobin, Solicitor Advocate
Clyde & Co, London
[email protected]
+44 (0)20 7623 1244
About Clyde & Co
 Leading Insurance and Reinsurance Law Firm in World
 16 Offices; lawyers from 20+ jurisdictions, including
Russia; 1000 staff – 500 lawyers
 Insurance/Reinsurance largest department
 Also leading firm in Transport, Trade and Natural
Resources, Shipping and Aviation
 Act for all major insurers and reinsurers, and Lloyd’s
Our International Network
London
St Petersburg
St Petersburg
London
Guildford
Moscow
Guildford
Cardiff ParisParis
NantesBelgrade
Belgrad
Cardiff Nantes
e
Piraeus
Piraeus
Los Angeles
New York
Caraca
Caracas
s
Rio
Shanghai
Abu Dhabi Abu
Dubai
Hong
Hong
Dhabi
Dubai
Kong
Kong
Singapore
Singapore
Introduction
 Russian market grows – demand for reinsurance
grows.
 Need to be prepared – current reliance on brokers
 Legal documents need legal approach
 Importance of English Law and practice
- London, Bermuda, Gibraltar, Ireland, Singapore, Hong
Kong, Dubai.
- US
- London market wordings
Topics
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Basic overview
Types of Reinsurance
Follow the Settlements
Claims Control / Claims Co-operation Clauses
Conditions Precedent
“Ex gratia” – “without prejudice” settlements;
commutations
 Practical tips
Types of Reinsurance
 Proportional:
- Quota Share; Surplus; Facultative/Obligatory treaty
 Non- Proportional
- Excess of Loss – Layers
NON PROPORTIONAL
10
M
REINSURER
C
PROPORTIONAL
REINSURER
A
10%
REINSURER
B
20%
REINSURER
C
25%
REINSURER
D
25%
5M
REINSURER
B
1M
REINSURER
A
500,00
0
500,00
0
0
INSURANCE COMPANY
INSURANCE
COMPANY
REINSURER
E
5%
Bonner v Cox - “Aon 77”
 Bonner v Cox [2005 EWCA Civ 1512]
- “The fundamental difference between these two types of
reinsurance is that the former involves a sharing of risks
(premium and losses) between reinsured and reinsurer.
The latter does not.”
- In excess of loss contracts: “The commercial interests of
the reinsured and of the reinsurers do not overlap. They
are not partners in a joint venture; each has their own
separate commercial interests which will probably conflict;
one profits at the expense of another …”
What does reinsured have to prove?
 Where no “follow the settlements” clause
-
Reinsured must strictly prove:
Liability under original insurance policy
AND – that liability covered under reinsurance policy
Importance of legal liability – Commercial Union v NRG Vicory Reinsurance [1998] 2 Lloyd’s Rep 600
 Attempts to get round strict rule
-
“Follow the settlements”
“Follow the fortunes” (US)
“Pay as may be paid”
Many cases on particular wordings
All designed to reduce what reinsured has to prove.
Stops reinsurer arguing that insurance company was not in fact liable on claim.
BUT – does not automatically force reinsurer to pay.
“Follow the Settlements”
 Insurance Co of Africa v Scor
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[1985] 1 Lloyd’s Rep 312; [1983] 1 Lloyd’s Rep
Property loss
“Being a reinsurance of and warranted same … terms and
conditions as and to follow the settlement of the Insurance
Company of Africa”.
 Do reinsurers simply have to pay whatever the reinsured
settles? NO
-
Court said: Reinsured must prove:
a) Loss as recognised by them falls within reinsurance; AND
b) In settling the inwards claim, insurers have taken all proper and
business-like steps in making a settlement”
See also Hill v Mercantile & General
Proper and Businesslike?
 What would your reinsurers expect to see?
-
Proper and full file
Proper loss adjusters and other expert report
Notification of loss
All proper defences raised in litigation
Legal advices as to a) Coverage and b) Settlement
Decision to settle based on legal liability
Evidence on file of decision making – organised and
rational.
Claims Control Clause / Claims Cooperation

When Used?

Much variation in wording; exact wording very important

Typical Claims control clause – NMA 2738
“…It is a condition
Reinsurance that:
precedent to Reinsurers' liability under this
(a) The Reinsured shall give to the Reinsurer(s) written notice as soon as reasonably practicable
of any claim made against the Reinsured in respect of the business reinsured hereby or of its
being notified of any circumstances which could give rise to such a claim.
(b) The Reinsured shall furnish the Reinsurer(s) with all information known to the Reinsured in
respect of claims or possible claims notified in accordance with (a) above and shall thereafter
keep the Reinsurer(s) fully informed as regards all developments relating thereto as soon as
reasonably practicable.
(c) The Reinsurer(s) shall have the right at any time to appoint adjusters and/or
representatives to act on their behalf to control all investigations, adjustments and
settlements in connection with any claim notified to the Reinsurer(s) as aforesaid.
(d) The Reinsured shall co-operate with the Reinsurer(s) and any other person or persons
designated by the Reinsurer(s) in the investigation, adjustment and settlement of such claim.”
Claims Control / Claims Cooperation
 “Condition Precedent”
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If breached – reinsurers do not have to pay claim
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Even if reinsurer suffered no prejudice
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Strict compliance with clause necessary – very strict English law
concept – not exist in Civil Law countries.
 Claims Control/Cooperation and follow the Settlements?
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You must still comply with claims control/cooperation clause.
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Cannot rely on follow settlements.
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See Gan v Tai Ping; ICA v SCOR
Without Prejudice / Ex gratia Settlements
 “Ex gratia” and “without prejudice” payments may
not be covered by a reinsurance
- See wording
- Assicurazioni Generali v CGU [2004]
Commutation
 When a reinsurer/insurer wish to settle all their
outstanding and future claims, can the reinsurer
claim that from its reinsurer (“retrocessionaire”)
 Past losses may be payable on normal principles
 But – IBNR (“Incurred but not reported”) may
cause problems.
 Arguably, commutations not recoverable at all
(Overseas Union v Home Insurance – Singapore
High Court)
Other Important Areas
 Limitation
 Rights of Inspection
 Overriding Exclusions in Reinsurance
 Misrepresentation / Non-disclosure
 Arbitration / Litigation / Law Jurisdiction
Practical Advice
 Do not always rely on brokers
 Behave in a “proper and businesslike way” in claims
handling
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Proper files and accounts for each loss
Proper loss investigation
Experienced / trained staff
Legal advice as to settlement / coverage if not clear
 Know your reinsurance contract
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Is loss covered under insurance and reinsurance?
Follow the settlements?
Claims control?
English / French/ German / Russian law?
Take legal advice
Disclaimer
This is for information and general discussion
purposes only. It is not legal advice.
GOODBYE!
THANK YOU!
Andrew J Tobin
Solicitor Advocate
Clyde & Co, London
[email protected]
(0)207 648 1744