Risk Management for Renewals - Breakfast Briefing 2007
HOW TO MANAGE SOME OF THE KEY LEGAL RISKS IN REINSURANCE DOCUMENTATION
Pressure from brokers has led to an
increasing trend for the mediation
clause to be included as standard in
reinsurance renewals contracts, but a leading
law firm warned at Baden-Baden that such an
approach should be avoided.
Speaking during The Review's Risk Management
for Renewals breakfast briefing
Colin Croly, partner and head of the reinsurance
and international risk team at Barlow
Lyde & Gilbert (BLG) advised attendees
that compulsory reference to mediation in
contracts brought with it its own difficulties.
"It is currently fashionable for brokers to
suggest including such a provision in contracts,"
he said."However, it is important to
remember that although people can mediate
they don't have to accept the verdict."
"This tool works best when you have full
disclosure of documents. Some parties may
even use it as a stalling tactic. Our advice is not
to put a mediation clause in as compulsory."
With the current increased emphasis on
risk management transforming the way
many re/insurers view their operations, Mr
Croly said that one of the most effective ways
to reduce risk ahead of renewals was to
ensure that contract wordings were
watertight.
"Choose your words carefully," he
said. "For example, there is a big difference
between 'cause' and 'event'."
Mr Croly and fellow speakers, BLG
partner Simon Cooper and Reinhard
Dallmayr, senior partner of Bach,
Langheid & Dallmayr, the largest insurance
law firm in Germany, also offered
some practical guidelines to the audience
to ensure end-of-year renewals
proceeded as smoothly as possible.
These included considering whether each
of the contractual terms were appropriate;
checking whether the governing law had
been spelt out; making sure the terms of the
agreement are clear and easily identified;
and ensuring that losses would aggregate in
the appropriate manner.
The briefing concluded with all speakers
stressing the importance of both parties
involved in any agreement being sure from
the outset how any future disputes would be
resolved."And make sure you are comfortable
with the chosen procedure,"Mr Croly added.
This was a highly practical and interactive presentation highlighting key legal risks to be considered and managed in reinsurance deal documentation.
Led by Colin Croly and Mike Munro of Barlow Lyde & Gilbert LLP, with Reinhard Dallmayr of Bach Langheid & Dallmayr, the briefing focused on a sample excess of loss contract and, referring to actual examples, giving guidance on key questions including:
- Aggregation of losses and claims - will the contract work as intended?
- Follow the settlements - will Reinsurers be bound to follow?
- Notification of losses and claims - what is required and when?
- DJ and coverage costs - what is covered?
- Managing and controlling claims - does the contract work as a whole?
- Warranties - a problem of fairness?
- Dispute resolution provisions - a clear mechanism for solving problems, or a source of problems?
Considering these issues from both an English and German law perspective, the
briefing will also highlight differences in approach between these two major jurisdictions - and the
impact of those differences on legal risk management.
