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Insurance > 5. Reinsurance > Flashcards

5. Reinsurance Flashcards

1
Q

How is reinsurance usually placed

A

As in insurance market - subscription + towers

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2
Q

What is surplus line proportional reinsurance

A

Cedant retains X line and the reinsurer the match that line

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3
Q

When is commission paid by reinsurer to reinsured

A

Quota share proportional - as acting like broker

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4
Q

What is insured called in retrocession C

A

Retrocedant

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5
Q

What market practice argument can be made for claims control clause

A

If not labelled to be CP, it is market practice for it to be, so if both parties are sophisticated insurers, both would have known = CP

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6
Q

Ratio from Wasa International

A

Couldn’t give PP different definition under English law - parties didn’t intend for policy to respond regardless of when damage occurred or period to which losses related

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7
Q

Why is facultative reinsurance rarely used

A

Administratively time-consuming and no certainty cover will be available

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8
Q

Two cases on incorporation of underlying terms of original policy

A

Butcher and Was a International

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9
Q

What case showed that labelling of clauses is not determinative

A

Eagle Star

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10
Q

What kind of payments does FtS clause usually exclude

A

Ex gratia payment

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11
Q

Two kinds of proportional reinsurance

A

Quota share and surplus

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12
Q

What does reinsurance help to do

A

Spread loss and utilise financial resources effectively

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13
Q

What is non-proportional reinsurance

A

Cedant decides how much of risk to cede and retain (NOT SHARED)

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14
Q

What was the outcome in ICA v SCOR

A

Only the first part of the clause was a CP, and had only breached the latter part, so still liable

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15
Q

Example of collateral terms not incorporated into reinsurance C

A

Arbitration of law/J clauses

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16
Q

What are the 3 things to comply w/ before reinsurer bound by settlement of cedant

A

If within terms of RI, if within terms of underlying C, and if settled in honest and business-like manner

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17
Q

Facts of Wasa International

A

‘Policy period’ had different meaning under Pennsylvanian (original C) and English (reinsurance C) law - former, only need some damage in PP to recover 100% remediation, but latter only liable for damage in PP

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18
Q

Two general types of reinsurance - how can it be split

A

Proportional or non-proportional

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19
Q

What is the point of a claims cooperation clause

A

Keep reinsurer informed - prompt notification + settlement dependent on reinsurer approval

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20
Q

What is XL reinsurance

A

Reinsurer indemnifies cedant for losses in excess of X figure for a single loss

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21
Q

Why are ex gratia payments usually excluded from FtS

A

No legal liability, so not business-like manner and not within terms of RI

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22
Q

Case on claims control takes precedence over FtS

A

Eagle Star

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23
Q

What is facultative reinsurance for

A

Specific risk underwritten, as a one-off

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24
Q

Ratio from Butcher

A

Intention for reinsurance to indemnify cedant for valid insurance liability, so same outcome should result for both parties

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25
Q

What is insurer called in retrocession C

A

Retrocessionaire

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26
Q

If FtS incorporates original terms of policy as well , where do you start

A

Consider Hill to see if settlement to be followed, and then see if any terms (not) incorporated and can be relied on to avoid liability (Butcher and Wasa)

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27
Q

What is clash cover

A

Protects cedant from paying out on multiple claims from same loss

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28
Q

What is quota share

A

% of policy ceded

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29
Q

What was the outcome in Eagle Star

A

Clause was claims control and CP to liability, and CP took precedence over FtS clause

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30
Q

What case gives the test for if reinsurer bound by settlement of cedant under FtS clause

A

Hill v Mercantile

31
Q

Case on claims cooperation

A

ICA v SCOR

32
Q

Facts of ICA v SCOR

A

CP to liability of notification + no settlement w/o approval

33
Q

How does cedant decide how much reinsurance required if non-proportional

A

Determines ‘Probable Maximum Loss’

34
Q

What is proportional reinsurance

A

Risk and premium shares between cedant and reinsurer

35
Q

Eagle Star on FtS clauses

A

Any CP (even if not labelled as such) takes precedence over FtS clause

36
Q

What does having reinsurance help insurer to do in terms of building business

A

Increase market share by expanding UW capacity, raise profile and therefore increase profit

37
Q

Facts of Eagle Star

A

Claims control clause labelled as coop and not stated to be CP

38
Q

What kind of payments are usually recoverable under FtS clause

A

W/o prejudice payments

39
Q

What is a treaty reinsurance policy

A

Entered into annually, covering either all or part of business, and reinsurer automatically covers risks which meet criteria

40
Q

What are the benefits of treaty reinsurance

A

Reduces admin and gives certainty

41
Q

Example of wording used to incorporate terms of underlying CoI

A

‘Ts&Cs as original’

42
Q

What is the main point of a claims co-op clause (other than keeping insurer informed)

A

Requiring insurer to approve settlements beforehand

43
Q

Facts of Butcher

A

Original policy governed by Norwegian law, reinsurance by English. BoW clause under original, which meant could avoid policy under English law, but not under Norwegian as not causative of loss

44
Q

is there still a material non-disclosure if due to failure of broker

A

Yes

45
Q

If there is no FtS clause, what is the burden on the cedant

A

Has to prove legal liability under original policy and that reinsured has to indemnify under RI C

46
Q

What happens if CP to liability not complied with

A

Avoids liability

47
Q

What is the contract called if insurance on reinsurance

A

Retrocession

48
Q

What is important to consider when choosing reinsurer

A

Rating

49
Q

How does reinsurance help to utilise financial resources effectively

A

Avoids need to hold capital in reserves

50
Q

What is the downside of fac/oblig

A

Leaves reinsurer vulnerable to cedant’s UW judgment, reflected in a higher premium

51
Q

What is the burden on the cedant if there is an FtS clause

A

No need to prove liability

52
Q

Three cases on FtS clauses

A

Eagle Star, ICA v SCOR and Hill v Mercantile

53
Q

What case distinguished itself from Butcher

A

Wasa International

54
Q

What is stop loss reinsurance

A

Triggered when cedant’s aggregate losses exceed X

55
Q

What happens if losses over cover in XL reinsurance tower

A

Reinsured bears loss itself

56
Q

For what two reasons is it unlikely reinsurer will contract out of IA

A

Administrative burden to comply w/ s.17 IA on transparency, and would be viewed unfavourably by cedant

57
Q

What happens if bare condition not complied with

A

Damages for prejudice caused

58
Q

Case applying to claims control clauses

A

Eagle Star

59
Q

What case suggested that claims co-op takes precedence over FtS EVEN IF not CP

A

ICA v SCOR

60
Q

What is a claims control clause

A

Reinsurer has right (not O) to manage the claim

61
Q

What terms are not incorporated into reinsurance C from CoI

A

Those that don’t make sense, or if collateral

62
Q

Hill v Mercantile key

A

3 FtS

63
Q

What is fac/oblig reinsurance

A

Cedant chooses what to cede, and reinsurer has no choice but to accept

64
Q

Case on claims co-operation clause takes precedence over FtS

A

ICA v SCOR

65
Q

How do you work out aggregate losses for stop loss reinsurance

A

Bundling losses and defence costs together

66
Q

What strong presumption is used for incorporating terms

A

Strong presumption of back to back cover under proportional facultative policy

67
Q

What is reinsurance

A

Insurance on insurance

68
Q

Is there a contractual relationship between direct insured and insurer?

A

No

69
Q

What is the downside of treaty reinsurance

A

Reinsurer has no choice in accepting (reflected in higher premium)

70
Q

What is the key idea from Butcher and Wasa International when using back to back policies

A

Will look to the intentions of the parties to determine what is incorporated

71
Q

What happens if insurer has several different reinsurance programmes covering same loss - how to claim

A

Fac policy first, then specific class treaty, then general business treaty

72
Q

When is XL reinsurance commonly used

A

For cat cover

73
Q

How is XL reinsurance distinct from stop loss?

A

Former kicks in for single** loss, whereas latter kicks in for **aggregate losses

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