Reinsurance Contract Wordings

This In-house training programme is highly practical and uses your own contract wordings and claims management systems for the team excercises to ensure maximum impact for the team

Course Overview

This In-house training programme is highly practical and uses your own contract wordings and claims management systems for the team excercises to ensure maximum impact.

This programme will ensure your team:

  • Appreciates the basic legal principles of reinsurance terms and contract wordings
  • Understands the common clauses and legal considerations
  • Are aware of the complexities of follow and settlement clauses
  • Fully aware of clauses that present particular difficulties

Your next step is to call us now on +44 (0)20 7729 6677 or email us at info@falconbury.co.uk or use our contact form and find out how we can help. There are no commitments, and if we cannot help our advice and recommendations are free of charge

Sample Programme Day 1

Introduction
  • Why have a wording? What is a wording?
  • Wording vs slip
  • Parties to the wording; role and position of brokers
  • How the contract is formed; necessary requirements for a contract
  • Choice of law; importance for legal interpretation of contract wordings; importance and use of precedent in common law jurisdictions
  • What is not in the wording (general legal principles): utmost good faith and its effects; general duties of reinsurer and reinsured; what is “performance” of the contract?
Setting the context; re-cap the basics
  • Wordings specific to technical/commercial operations of parties – ie reinsurance
  • Will contain specific clauses and technical terms particular to reinsurance; dependent on aims
  • Reminder of basics: what is reinsurance?
  • Types and methods of reinsurance (fac and treaty; proportional and x/l)
  • Differences between types of treaty – QS; Surplus; fac oblig
  • Different forms of X/L treaty – Per loss and per risk; LOD and RAD; Occurrence covers, catastrophe covers; “Top & Drop” and “cascade” covers; Stop Loss and Aggregate Excess
  • Purposes of different methods (risk-sharing/premium relief; loss mitigation/balance sheet protection)
  • Follow the fortunes and follow the settlements
  • Demonstration of some basic approaches to x/l pricing – exposure and experience/burning cost bases
Legal principles of contract construction (interpretation)
  • Wording the final capture of the parties’ agreement (Not “intent”)
  • Interpret document as a whole
  • Ordinary meaning of words
  • Different words assumed to have different meanings
  • Treatment of technical terms, and words and phrases previously interpreted
Putting together a wording
  • Format: schedule or full; standard or bespoke; facultative certificates
  • Endorsements and renewals
  • London Market (LMR) slip/wording (Contract Certainty)
  • Basic structure:
    • proportional vs x/l
    • What clauses do you need?
    • preamble/reinsuring clause
    • consideration/premium
    • accounting clauses
    • claim calculation clauses
    • operating clauses
    • regulatory clauses
    • ending it all
Group Exercise
  • Comparing two common wordings, one proportional, one x/l, pitfalls to identify differences; spot potential
  • Comparison, as above, of a property and a casualty wording – with particular reference to loss definitions/reinstatements/unl and costs clauses etc
Clauses which present particular difficulties, and the key legal cases
  • Warranties and conditions – claims notification, co-operation and control clauses; two-risk warranties
  • Incorporated terms – and those that can’t be incorporated: law & jurisdiction; dispute resolution
  • Follow settlements and follow fortunes
  • Events, occurrences, accidents, losses & claims; aggregation clauses
  • Access to records clauses – when and how you can use them. Arranging an inspection of records
  • Dispute resolution clauses – different methods of dispute resolution. Do you need a clause? Implications of different clauses
  • Law & jurisdiction clauses – importance; different international aspects of reinsurance law; USA/England & Wales/Bermuda; conflict of laws and international Rules for choosing applicable law – Rome II and prior

Sample Programme Day 2

Practical applications (1) Premium and accounting clauses related to technical accounting
  • PR and X/L distinguished
  • Determining the underlying premium base
  • Calculating M&D; adjustments; reinstatements
  • PR treaty balances; deductions; reserves & interest; portfolio transfers and their effect on accounting for claims; earned and written bases of accounting; profit commissions and sliding scale commissions
  • With worked/group exercises throughout
Practical applications (2) Claims assessment and accounting
  • X/L: loss definition/hours clause and unl – calculating the X/L loss
  • UNL/costs clause – handling loss adjustment expenses and fees
  • P/R: cash loss clauses; claims reserves
  • Recognising and handling, reinsured’s non-compliance with claims co-operation clauses etc
  • Breach of warranty, non-disclosure and mis-representation with worked exercises throughout
Practical applications (3) Relationship between contract wordings/business written and P&L accounts
  • Basics of a reinsurance P&L account
  • The technical account, and how the figures are made up (premium and claim accounting; expenses,
    LAE and ULAE)
  • Year of account/underwriting year/accounting year bases; Lloyd’s 3-year and 1-year accounting
  • Technical reserves: risk and unearned premium reserves; case reserving and IBNR
  • Relationship to the wording(s) written – relevant clauses
  • Outline of statistical approach to producing the loss reserves

Wordings surgery
Discussion of the teams own difficulties experienced; problem clauses and wordings encountered.

Recommended Trainer

Phillippa Rowe is Senior Partner of independent reinsurance consultants Phillippa Ross & Co. Phillippa has over thirty years experience of insurance and reinsurance claims in Lloyd’s and the London Market as well as internationally. She began her reinsurance career with fifteen years with the Kiln Group at Lloyd’s. She currently acts as arbitrator, mediator, expert witness and technical consultant in a wide range of claims, wordings and market practice matters and writes, lectures and provides training courses on similar subjects.