Insurance: Passing the buck
The partnership between insurer and reinsurer has been brought into sharp focus by the recent case of Assicurazioni Generali v CGU. Simon Kilgour and Gavin Coull look at the implications of the case for both sides of the alliance
In every reinsurance arrangement, there is an element of partnership, particularly where the insurance and reinsurance are written back-to-back on fundamentally the same terms. This partnership is enshrined in the commonly used ‘follow the settlements’ wording, which binds reinsurers, subject to any express exceptions, to the settlements made by their reinsured (the original insurer) with the underlying insured. This type of wording has clear benefits for the reinsured, who can settle claims safe in the knowledge that the reinsurer will pay his share.
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