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Chapter 7 Contract wordings 7/37

• There are special reporting provisions requiring notification to reinsurers within 90 days of the
reinsured having knowledge of any claims series event involving five or more claimants, or the
reinsured establishing a reserve for a claims series event in excess of 25% of the retention.
• A list of exclusions including all losses occurring before 1986, and claims part of a claims series event
which arise from any policy issued or renewed after notification of such an event.

D10D Commutation clause
In this clause, the parties agree to close off (or commute) all claims under the reinsurance contract,
extinguishing a reinsurer’s known and unknown liabilities. In return for a single payment, the reinsured
grants the reinsurer a full and final release from all past, present and future obligations under the
contract.
Commutation may be optional or mandatory. If mandatory, the parties must come to an agreement on
Commutation may be
the amount of the payment and the terms to discharge the reinsurer of its liability. Such a clause will optional or mandatory
typically detail the mechanism for valuing that liability and, if the parties cannot agree, for settling the
dispute (usually with the assistance of one or more actuaries).

D10E Sunset clause

This clause requires the reinsured to notify claims within a certain period beyond which the contract
ceases to respond. In other words, the sun sets on claims not reported to reinsurers within, for example,
five years of expiry of the reinsurance treaty. This type of clause is usually found on old US non-
proportional casualty treaties.
The clause requires the reinsured to notify reinsurers, within the requisite period, of all outstanding
occurrences which have not been settled and may give rise to a claim under the reinsurance contract. If
not listed (or reported), no liability attaches under the reinsurance contract and they are lost to the
contract. A commutation provision usually follows.

D10F Extended claims reporting clause
This clause is an extended version of the previously discussed claims notification and handling clauses. Reference copy for CII Face to Face Training
The clause serves to require the reporting of three types of claims:
• Claims valued in excess of a specified percentage of the retention irrespective of liability.
• Certain types of serious bodily injuries irrespective of value or liability.
• Claims involving periodical payments under the Damages Act 1986 (as amended). Chapter
A copy of a claims cooperation and reporting clause (IUA 02-015) can be found in appendix 7.4 on
RevisionMate. 7

D10G Occupational disease clauses
These clauses set out the basis on which reinsurers are prepared to provide cover for occupational
disease and physical impairment arising under an employers’ liability and/or workers’ compensation
policy.

It was recognised that, while the legal liability for occupational disease and physical impairment may
arise from a sudden and identifiable event, it may also arise from a gradually operating occupational
hazard spread over many years. The clauses, therefore, apply in the latter situation and define what
constitutes an event, and the date of the loss occurrence for the purpose of determining the applicable
treaty period. The standard clauses are known as the accident circle occupational disease (ACOD)
clauses. These are shown in table 7.3.