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7/20 M97/February 2018 Reinsurance

In 2012, the IUA published a model surplus cession clause as follows:
Cession Clause (IUA 09-001 (P12))
a. The Company binds itself to cede to the Reinsurer and the Reinsurer agrees to accept the share,
stated in the attached Schedule to this Agreement, of all surplus amounts over the gross amounts
retained by the Company for its own account in respect of the business described in the Schedule.
The gross amount retained by the Company shall not exceed the sum stated in the Schedule and the
amount accepted by the Reinsurer shall not exceed the treaty limits as specified in the Schedule.
b. The Reinsurer shall only cover those risks accepted by the Reinsured which are situated within the
territorial limits as defined in the Schedule.
c. The Reinsurer shall not be liable for any losses caused by or arising from the exclusions detailed in
the Schedule.
d. i. The Reinsured shall decide what constitutes one risk hereunder and unless otherwise hereinafter
provided shall fix its net retention without reference to the Reinsurer.
ii. Should a loss affect this Agreement prior either to the fixing or revision of its net retention then
the net retention of the Reinsured shall not be less than that shown by its records and practices
to be its usual net retention for similar risks.
e. The Reinsured may in the interest of the Reinsurer reduce the amount to be ceded in respect of any
risk by effecting individual reinsurances. The Reinsured may also effect reinsurance to protect its
overall net retained portfolio.
f. An insurance granted by the Reinsured wherein the Reinsured is named as the Insured either alone or
jointly with another party or parties shall not be excluded from this Agreement merely because no
legal liability may arise in respect thereof by reason of the fact that the Reinsured be the Insured or
one of the Insureds.
g. The liability of the Reinsurer in respect of each risk covered hereunder shall commence and expire
simultaneously and automatically with the liability of the Reinsured in respect of the original
acceptance subject to the provisions relating to Commencement and Termination.

It should be noted that paragraph (e) of this clause permits the reinsured, in the interest of the reinsurer, Reference copy for CII Face to Face Training
to reduce the amount of a risk ceded to the treaty by effecting specific reinsurance. As an exception to
the obligation to cede to the line capacity of the treaty, it would be used where the reinsured considers a
particular risk might unbalance or adversely affect the treaty results if it incurs claims. The paragraph
also allows the reinsured to effect reinsurance to protect its overall net retained portfolio with, for
7 example, a property per catastrophe and/or per risk excess of loss treaty.
Chapter C2 Record of cessions clause

This clause requires the reinsured to maintain records of all cessions to the contract, including renewals
Maintain records of
all cessions to the and amendments, and to provide a copy in bordereau form to reinsurers. Such a record would be
contract available for inspection in any event to a reinsurer by reason of an ‘access to records clause’ (or similar).

C3 Commencement and termination

This clause sets out when cover under the reinsurance contract commences and when it terminates, and
the basis of that cover.

C3A Commencement
Cover is typically arranged on an underwriting year basis or on an accounting year basis.

Underwriting year basis
On this basis, reinsurers agree to assume liability for claims on risks or original policies issued or
renewed during the period of the reinsurance.
This Agreement shall take effect on the date stated in the Schedule and continue in force until terminated
and shall be in respect of policies issued or renewed during the period of this Agreement not to exceed 12
months plus odd time, not exceeding 18 months in all.