LG highlights effects of recent reinsurance cases
13 May 2005
Held at Lloyd's of London and attended by approximately 150 delegates, a seminar hosted by LG on May 12 looked at the practical implications of some of the most important recent cases affecting the reinsurance industry.
According to William Sturge, partner in LG's Reinsurance Group, who chaired the seminar, the last year has seen a plethora of cases affecting reinsurance on a wide range of issues.
And, according to Nick Bradley, head of LG's Reinsurance Group, insurers and reinsurers have new opportunities to ensure their choice of jurisdiction in the tactical battle to gain control of the jurisdiction in which their disputes are heard, but also face new obstacles.
Bradley noted that the European Court of Justice decision in Owusu v Jackson & Others has effectively deprived the English courts of their right to stay an action brought before them if the defendant is UK-domiciled, even if the courts consider that the action is proceeding in the wrong jurisdiction. "In other words, if there is an English defendant, the English court no longer has the power to grant an anti-suit injunction," he explained. This is of significance to insurers and reinsurers as the country in which proceedings commence will have a major impact on the outcome of a dispute.
Colin Peck, partner in LG's Reinsurance Group, looked at the allegations of "net underwriting" in the recent cases of Sphere Drake and Bonner v Cox. Peck not only highlighted Mr Justice Morison's decision in Bonner v Cox to imply three terms into the contract between the parties, but also raised a number of questions left unanswered by the judgment, including what is meant by 'an underwriting judgement' and 'business ordinarily written by the reinsured'. "For non-proportional business, reinsurers appear to bear the risk of their reinsured's carelessness, subject to the three specific terms implied by Mr Justice Morison," concluded Peck.
One decision that may not have the dramatic effect on the world of reinsurance that was previously suggested is Lumbermens v Bovis. The fear is that the decision could affect the recoverability 'outwards' from retrocessionaires of payment made under commutation agreements on 'inwards' reinsurance. However, according to Simon King, senior assistant at Lawrence Graham, the decision is not applicable to reinsurance and is unlikely to mark the end of global settlements. "The decision is concerned with ascertainment in the context of a liability policy. It is generally accepted that, as a matter of law, reinsurance is not liability insurance," says King.
Search
Need more information?
Colin Peck
+44(0)20 7759 7608