Page 68 - Reinsurance Management IC85

Reinsurance Management

Hence, theoretically, if the ceding company is guilty
of breach of Utmost Good Faith in respect of any
cession, the reinsurers would be entitled to deny
liability.

Q. Outline the essential ingredients of
reinsurance contracts as defined in Delver vs.
Barnes (1807).

Ans: In Delver vs. Bames (1807), Lord Mansfield has
defined that "reinsurance consists of a new assurance,
effected, by a new policy, on the same risk which was
before insured, in order to indemnify the underwriters
from their previous subscriptions and both policies are
in existence at the same time". From this, the essential
ingredient of reinsurance can be stated as :-

a. the existence of an original policy of insurance,
b. an agreement to indemnify the reinsured in respect

of its liability under the policy, which agreement
itself is a contract of insurance.

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