Reinsurance Contracts: What you should know

1. Reinsurance Contracts:What you should know September 20, 2006

2. Reinsurance Contracts: what you should know PRESENTERS: Kim Outerbridge (Wilkerson) Associate Attride-Stirling & Woloniecki Alan Waring President Crump International Michael Merlo Senior Vice President & Chief Counsel Aon (Bermuda) Ltd.

3. Reinsurance Contracts THE QUESTION Is there ANY REINSURANCE CONTRACT that would stand up to rigorous legal/judicial scrutiny?

4. Discussion Outline In this interactive discussion, the panel will examine: The economics of the contract development and review process Mismatches between inwards & outwards contracts Follow the Settlements and the problem of �legal� liability Jurisdiction, Choice of law & Dispute resolution language

5. The contract review process Why does it seem that the insurance industry, as a whole, approaches contract development and review with less resource, precision or forethought than that seen in other industries (for example, banking & finance)? Whose job is it anyway? What are the real economics of Contract review and achieving certainty?

6. Reinsurance Contracts: how certain can contract certainty be? captives by design are often created for specific/unique client needs. What are the challenges of crafting unique language and how certain can you be of intended outcome? If a solution is crafted that leaves the client happy, the broker happy and the market happy can there be a false sense of security about the projected "claims" outcome? What steps to take to be as certain as possible. do the economics make it worth spending legal fees on? difference between spending fees on a 'template form', e.g the Bermuda Casualty form, and a unique tailored form in virtually all other financial fields there are vast legal expenses associated with setting up a contract. In insurance it is usually no more than the broker telling the client that it meets the intended need ....why?

7. A case in point Great North Eastern Railway Limited v JLT The brokers ongoing duty

8. What you should know about lazy construction The myth of �back to back� cover the downside of incorporating terms by reference mismatches between inwards and outwards contracts Why cover is not back to back when that was the parties' intention

9. What you should know about mismatches Mismatches between inwards and outwards contracts. what are some potential pitfalls to watch out for to assure that there are no material incongruities between a captive�s inward (i.e., insurance contract with its policyholder) and outward (i.e., reinsurance contract(s) with its reinsurers) contracts? Use of same form for inwards and outwards contracts without sufficient attention paid to necessary modifications to each. Incorporating underlying contract by reference.

10. What you should know about incorporating by reference Are there particular provisions for which �incorporation by reference� or using the underlying wording as the basis for the reinsurance wording is especially problematic? Dispute resolution clauses Exclusive jurisdiction clauses Choice of law clauses Claims notice clauses Assistance and cooperation/claims control clauses

11. What you should know How can captives assure that their inwards and outwards contracts both reflect the parties� intentions? Avoid blind �cut and paste� of boilerplate Say what you mean, and mean what you say. Undertake a common sense review

12. A case in point