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Introduction

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Reinsurance Arbitrations

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Abstract

Reinsurance contracts traditionally have been considered “gentlemen’s agreements.” In modern times, reinsurance contracts have moved away from the handshake agreements of yesterday and focus more on the realities of the bottom line. Reinsurance contracts often, if not always, especially reinsurance treaties, contain an arbitration clause. Hence, should a dispute arise, it will be resolved by resort to arbitration. Reinsurance arbitration differs markedly from commercial arbitration in other industries. Even if one forgets for a moment that the traditional reinsurance relationship is the reason why arbitrations occur in the reinsurance industry, and perhaps offers the greatest advantage for using arbitration, there also other numerous advantages to using arbitration alongside some disadvantages. Still, arbitration remains the preferred dispute resolution method in reinsurance.

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Notes

  1. 1.

    This practice is not limited to a primary insurance company and a reinsurer. It is commonplace for a reinsurer to turn around and retrocede risk to another reinsurer. In that transaction, the reinsurer is known as the retrocedent, and the insurance company assuming the risk of loss is the retrocessionaire; McDonald (2001), p. 328.

  2. 2.

    In the USA a federal policy in favour of arbitration developed many years ago and was made part of the law by Congress when the FAA was enacted. Most states also favour arbitration and have similar laws and court decisions enforcing arbitration clauses; Schiffer (2006).

  3. 3.

    General Accident Fire and Life Assurance Corpn v Tanter (The “Zephyr”) (1985)2 Lloyd’s Rep. 529; Lowry and Rawlings (1999), p. 301.

  4. 4.

    Butler and Merkin (1999); Lowry and Rawlings (1999), p. 301.

  5. 5.

    Lowry and Rawlings (1999), pp. 302–303.

  6. 6.

    Edelman et al. (2005), pp.11–12.

  7. 7.

    Edelman et al. (2005), pp. 12–13.

  8. 8.

    Lowry and Rawlings (1999), pp. 303–304.

  9. 9.

    Edelman et al. (2005), pp. 9–12.

  10. 10.

    Lowry and Rawlings (1999), pp. 302–304.

  11. 11.

    Balfour v Beaumont [1982] 2 Lloyd’s Rep. 493, 496; Edelman et al. (2005), p. 9.

  12. 12.

    Forsokringsakteselskapet Vesta v Butcher (1989)1 Lloyd’s Rep 331, 352; Edelman et al. (2005), pp. 9–12.

  13. 13.

    Edelman et al. (2005), pp. 12–13.

  14. 14.

    Edelman et al. (2005), p. 13.

  15. 15.

    Edelman et al. (2005), p. 15.

  16. 16.

    McDonald (2001), p. 329.

  17. 17.

    Schwepcke (2004), pp. 1–2.

  18. 18.

    Schwepcke (2004), pp. 1–2.

  19. 19.

    O‘Niell and Woloniecki (1998), pp. 31–32.

  20. 20.

    O‘Niell and Woloniecki (1998), pp. 27–34.

  21. 21.

    Geiger (2000), pp. 50–51.

  22. 22.

    Schwepcke (2004), pp. 3–4.

  23. 23.

    Schwepcke (2004), p. 4.

  24. 24.

    Schwepcke (2004), p. 4.

  25. 25.

    Schwepcke (2004), pp. 4–6.

  26. 26.

    Schwepcke (2004), pp. 4–6.

  27. 27.

    McDonald (2001), p. 330.

  28. 28.

    McDonald (2001), p. 330.

  29. 29.

    Schwepcke (2004), pp. 4–6.

  30. 30.

    For instance, if the formal treaty is to include an arbitration clause, the slip would simply state “arbitration clause .” Then a treaty would be generated providing a more formal and detailed documentation of the reinsurance contract. Sometimes a formal treaty may never be generated, the only terms of the reinsurance contract being in the placement slip ; McDonald (2001), p. 328.

  31. 31.

    The treaties usually incorporated antiquated language that rarely was read, or for that matter, legally understood. A typical example of the traditional relationship is found in an anecdote told by a gray-haired reinsurance executive, perhaps in contemplation of the “good old days.” He remarked: “[A]fter a treaty had been executed in those days, the superior threw it in the bottom drawer and it remained there for the duration of the treaty relationship. If a question was raised by the reinsured company about the treaty, as unlikely as that was, an amicable discussion would have followed and an agreement would have been reached without either party consulting the treaty. If the treaty had to be removed from the drawer, that suggested a major schism in the reinsurance relationship , even if the immediate questions were ultimately resolved”; Strain (1997), p. 568; McDonald (2001), p. 329.

  32. 32.

    Cohen et al. (1994), pp. 602–603; Compagnie de Reassurance d’lle de France v New England Reins. Corp., 825 F.Supp. 370, 383 (D. Mass. 1993); McDonald (2001), p. 329.

  33. 33.

    Rule 4.1 of the 1997 ARIAS UK Rules.

  34. 34.

    Rules 4.1.1–4.1.5 of the 1997 ARIAS UK Rules.

  35. 35.

    Rule 4.21 of the 1997 ARIAS UK Rules.

  36. 36.

    Rule 5.1 of the 1997 ARIAS UK Rules.

  37. 37.

    Rule 5.2 of the 1997 ARIAS UK Rules.

  38. 38.

    Rule 6.1 of the 1997 ARIAS UK Rules.

  39. 39.

    Rule 6.2 of the 1997 ARIAS UK Rules.

  40. 40.

    Rule 6.4 of the 1997 ARIAS UK Rules.

  41. 41.

    Rule 6.4 of the 1997 ARIAS UK Rules.

  42. 42.

    Rule 6.5 of the 1997 ARIAS UK Rules.

  43. 43.

    Rule 6.6 of the 1997 ARIAS UK Rules.

  44. 44.

    Rule 6.7 of the 1997 ARIAS UK Rules.

  45. 45.

    Rule 6.9 of the 1997 ARIAS UK Rules.

  46. 46.

    Rule 6.12 of the 1997 ARIAS UK Rules.

  47. 47.

    Rule 9.1 of the 1997 ARIAS UK Rules.

  48. 48.

    Rule 10.1 of the 1997 ARIAS UK Rules.

  49. 49.

    Rule 10.2 of the 1997 ARIAS UK Rules.

  50. 50.

    Rule 11.4 of the 1997 ARIAS UK Rules.

  51. 51.

    Rule 12.2 of the 1997 ARIAS UK Rules.

  52. 52.

    Rule 11.5 of the 1997 ARIAS UK Rules.

  53. 53.

    Rule 14.1 of the 1997 ARIAS UK Rules.

  54. 54.

    Rule 14.2 of the 1997 ARIAS UK Rules.

  55. 55.

    Rule 16.2 of the 1997 ARIAS UK Rules.

  56. 56.

    Rule 16.3 of the 1997 ARIAS UK Rules.

  57. 57.

    Rule 16.10 of the 1997 ARIAS UK Rules.

  58. 58.

    Rule 16.11.1 of the 1997 ARIAS UK Rules.

  59. 59.

    Rule 16.11.2 of the 1997 ARIAS UK Rules.

  60. 60.

    O‘Niell and Woloniecki (1998), pp. 639–647.

  61. 61.

    Home Insurance Co v Administratia Asigurarilor De Stat [1983]2 Lloyd’s Rep. 674.

  62. 62.

    Orion Compania Espanola de Seguros v Belford Maatschappij Voor Algemene Verzekringeen [1962]2 Lloyd’s Rep. 257.

  63. 63.

    Eagle Star Insurance Co. Ltd v Yuval Insurance Co. Ltd [1978]1 Lloyd’s Rep. 357.

  64. 64.

    O‘Niell and Woloniecki (1998), pp. 639–647.

  65. 65.

    Thomas and Lyons (2012), pp. 77-16, 77-17.

  66. 66.

    McDonald (2001), p. 330.

  67. 67.

    Who will decide disputes based on industry custom and practice, the intent of the parties’ and the honorable undertaking occurring in reinsurance; McDonald (2001), p. 330; Schiffer (2006).

  68. 68.

    Schiffer (2006).

  69. 69.

    McDonald (2001), p. 330.

  70. 70.

    Schiffer (2006).

  71. 71.

    McDonald (2001), p. 331.

  72. 72.

    Thomas and Lyons (2012), p. 77-18.

  73. 73.

    McDonald (2001), p. 331.

  74. 74.

    McDonald (2001), p. 330.

  75. 75.

    Insurance Company v Lloyd’s Syndicate [1995]1 Lloyd’s Rep. 272.

  76. 76.

    O‘Niell and Woloniecki (1998), pp. 632–633.

  77. 77.

    Unlike contracts that require arbitration before a specific arbitral organisation under that organisation’s rules, such as, for example, the American Arbitration Association and its Commercial Arbitration Rules; Schiffer (2006).

  78. 78.

    Schiffer (2006).

  79. 79.

    Thomas and Lyons (2012), p. 77-17.

  80. 80.

    McDonald (2001), p. 331.

  81. 81.

    Thomas and Lyons (2012), pp. 77-17, 77-18.

  82. 82.

    McDonald (2001), pp. 331–332.

  83. 83.

    Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958).

  84. 84.

    Thomas and Lyons (2012), pp. 77-17, 77-18.

  85. 85.

    Thomas and Lyons (2012), p. 77-17.

  86. 86.

    McDonald (2001), p. 331.

  87. 87.

    McDonald (2001), p. 332.

  88. 88.

    Michigan Mutual Insurance Company and Others v Unigard Security Insurance Company, 44 F.3d 826 (9th Cir. 1995).

  89. 89.

    Michigan Mutual Insurance Company and Others v Unigard Security Insurance Company, 44 F.3d 826 (9th Cir. 1995).

  90. 90.

    Michigan Mutual Insurance Company and Others v Unigard Security Insurance Company, 44 F.3d 826 (9th Cir. 1995).

  91. 91.

    Michigan Mutual Insurance Company and Others v Unigard Security Insurance Company, 44 F.3d 826 (9th Cir. 1995).

  92. 92.

    The governing standard for an award is that it not be “completely irrational” or be a “manifest disregard of the law”. In practice, however, it is virtually impossible to overturn an arbitration award . Further, no real appellate rights exist. For title insurers, this unfamiliar process can cause great difficulties. The arbitration panel’s likely ignorance of title insurance law, in combination with an unfamiliar procedure, may daunt title insurers, whose previous reinsurance experience, if it existed at all, consisted of cordial relationships among fellow title insurers in which disputes were rarely arbitrated; Hosack and Kline (1998), p. 109.

  93. 93.

    McDonald (2001), p. 338.

  94. 94.

    Hosack and Kline (1998), p. 108.

  95. 95.

    Neubacher (2004).

  96. 96.

    Duwe (2009), p. 189.

  97. 97.

    Duwe (2009), p. 189.

  98. 98.

    Duwe (2009), p. 189.

  99. 99.

    Duwe (2009), pp. 189–190.

  100. 100.

    Duwe (2009), pp. 189–190.

  101. 101.

    Duwe (2009), pp. 189–190.

  102. 102.

    Duwe (2009), pp. 189–190.

  103. 103.

    Duwe (2009), p. 197.

  104. 104.

    Duwe (2009), p. 197.

  105. 105.

    European Commission, Commission Recommendation 98/257/EC (1998), p. 31; European Commission, Commission Recommendation 2001/310/EC (2001), p. 56.

  106. 106.

    Directive 2008/52/EC (2008), p. 3.

  107. 107.

    http://ec.europa.eu/internal_market/fin-net/index_de.htm.

  108. 108.

    European Commission (2008), Consultation Document.

  109. 109.

    Duwe (2009), pp. 197–198.

  110. 110.

    McDonald (2001), p. 336.

  111. 111.

    Milligan-Wbyte and Cannon Veed (1989), p. 125.

  112. 112.

    Barlow Lyde and Gilbert LLP (2009), pp. 861–862.

  113. 113.

    Barlow Lyde and Gilbert LLP (2009), pp. 861–862.

  114. 114.

    And, to a lesser extent, in Germany and Switzerland.

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  1. Athens, Greece

    Kyriaki Noussia

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Noussia, K. (2013). Introduction. In: Reinsurance Arbitrations. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-45146-1_1

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