Page 172 - M97TB9_2018-19_[low-res]_F2F_Neat2

7/10 M97/February 2018 Reinsurance

The first part of the wording typically provides a brief description of the contract and a statement of the
The statement of the
parties must enable parties to the contract. The contract description outlines the main subject matter and type of reinsurance
all of the parties to contract (for example, property quota share or marine cargo excess of loss). As discussed in section A,
the contract to be
identified the statement of the parties must enable all of the parties to the contract to be identified.
Preamble
There may also be a preamble which, traditionally, provides a more detailed introduction to, and
description of the purpose of, the contract.

For example:
WHEREAS the Company insure and assume liability in respect of risks on interests of any description in
their Whole Account (this Whole Account including Hull, Cargo, Liability, War (Hull/Cargo), Energy
(Drilling Rig)).

IT IS HEREBY AGREED AS FOLLOWS:

It may, however, contain operative language such as the reinsurance agreement itself.
Reinsurance clause
At the outset of the wording, you would also expect to see the actual reinsurance agreement between the
parties, such as:

In consideration for the premium to be paid to Reinsurers by or on behalf of the Reinsured, the Reinsurers
shall reimburse the Reinsured in relation to…
This Agreement is subject to all limits, terms, conditions and exclusions contained herein.

There must also be a clear and comprehensive statement defining the business which is to be the
subject matter of the agreement.

B1 Limitation clauses Reference copy for CII Face to Face Training

B1A Period
This clause sets out the period (or term) of the reinsurance contract, which can be either continuous
Clause sets out the
period of the contract or fixed.
7 Continuous contract
Chapter A proportional treaty is usually a continuous contract, meaning that it continues until terminated on
notice (see clause below), by agreement or otherwise:

This agreement shall commence at [ ] on [ ] and shall continue until terminated by either party giving the
other at least 3 months’ notice to terminate at the 31 December of any year.

It is unlikely that the parties will want to commit to an indefinite arrangement. So, the right is reserved
for each party to give notice under the contract and this is usually three months prior to the anniversary
date. Such termination will have no impact on any business which has been or will be ceded to
reinsurers prior to the date of termination, 31 December in the example wording given above.
Fixed period contract
On the other hand, a fixed period is usual for a non-proportional treaty:

This Contract shall become effective on [ ] in respect of losses occurring on or after that date, and shall
remain in force until [ ], both days inclusive, Local Standard Time at the place where the loss occurs.

The period is typically a year but, exceptionally, it may be extended to achieve a more convenient
renewal/expiry date if, for example, the accounting date is changed or it is necessary to harmonise with
other contracts.

B1B Territorial scope clause
This clause defines the territorial or geographical scope of the reinsurance contract. Typically, it limits
Defines the territorial
or geographical scope the reinsurer’s liability under the contract by reference to, for example, the location of the insured
of the contract property, the domicile of the insured person, or where the original policies were issued or underwritten
by the reinsured.