Abstract
This thesis embarks upon an intensive investigation into the nature of the legal relationship between the parties to reinsurance contracts—the reassured (the original insurer) and the reinsurer. There is an emphasis on facultative reinsurance contracts made subject to the Full Reinsurance Clause, although non-proportional reinsurance contracts are considered too, namely with reference to the aggregation and allocation of losses in complex reinsurance programmes. The critical lens deployed to analyse the nature of the legal relationship between the parties is to consider how the balance of interests has been drawn between the parties and, in circumstances where it is not clear how a legal rule will operate, how the balance of interests may be drawn between the parties in the future. At the heart of the issue of the balance of interests between the parties are the notions of certainty and fairness.This thesis is the first piece of research to consider comprehensively the balance of interests between the reassured and the reinsurer, a concern which owes its relevance to the fact that the reforms implemented by the Insurance Act 2015 have been designed to redress the former imbalance of interests between the policyholder (the assured) and the insurer, and apply equally to reinsurance contracts, without full prior consideration. London continues to be a key player in the worldwide reinsurance industry: a significant volume of the world’s business is placed at Lloyd’s and in the London Market, and it is not uncommon for parties to international reinsurance contracts placed elsewhere to elect for their agreements to be governed by English law—English re/insurance law therefore finds a wide application.
This thesis suggests that the interests between the parties generally has been balanced appropriately and defensibly in all respects except one: The Fairchild Enclave and liability for mesothelioma claims. However, in terms of drawing the balance in the future, the main reform which threatens to disrupt the balance of interests between reassured and reinsurer is s.13A of the Insurance Act 2015.
S.13A implies a term into every contract of insurance that if the assured makes a claim under the contract, the insurer must pay any sums due in respect of the claim within a ‘reasonable time’ (s.13A(1)). The reinsurers’ liability to the reassured for liability the latter incurs to its assured under s.13A(1) currently is uncertain. This thesis attempts to provide certainty, while ensuring that sufficient heed is paid to fairness in formulating the legal rule.
This thesis suggests that if an insurer incurs liability under s.13A(1) to its assured, its back-to-back reinsurer is not liable to indemnify its reassured for the same—this confers certainty as reinsurers in the market currently are concerned about whether they may be deemed liable and, if so, the extent of their liability. Nevertheless, by virtue of a claims clause in the reinsurance contract, it may be the reinsurers’ fault that the reassured incurs liability to its assured under s.13A(1). In this scenario, this thesis suggests that the reinsurer is liable to indemnify its reassured by means of the implied duty of ‘good faith’ in exercising a contractual discretion—The Braganza Principle—and not by means of the reformed duty of utmost good faith in re/insurance law, s.17 of the Marine Insurance Act 1906.
| Date of Award | 1 Aug 2024 |
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| Original language | English |
| Awarding Institution |
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| Supervisor | Ozlem Gurses (Supervisor) & Manuel Penades Fons (Supervisor) |