Mystic Logo

Reinsurance Arbitration: The Forgotten Clause

by Robert M. DeMarco

Page 3


  1. How much time should be allowed to choose the panel and what happens if one party refuses to choose an arbitrator?
  2. How long to submit argument and to have a hearing if desired?
  3. What form should the hearing have?  For example, will each side produce witnesses and give testimony or will the arbitrators investigate and ask questions of the parties?
  4. How should the parties make their cases?
  5. Should they submit written reports, exhibits, oral presentations, etc.?
  6. What rules of evidence, investigation, or procedure might be desired?
  7. Should the parties be allowed to talk independently to the panel? Should the panel be allowed to contact the parties independently?
  8. Should the party chosen arbitrators be advocates for the party that chose them with the third arbitrator as an Umpire or Judge between them or should they all be totally independent? Should the arbitrators know which side chose them?
  9. Should the parties be allowed to canvass the arbitrator before his or her selection to the panel for his sympathies with such party, his technically expertise in the disputed area or type of business, his curriculum vitae or other "background" questions?
  10. Should the parties limit legal remedy such as appealing or even vacating the decision based on misconduct or unfairness?
  11. Will the arbitration clause govern under an insolvency, conservatorship or receivership?

This is not intended to be an all inclusive list but rather to give you the flavor of the types of questions you should be asking yourselves and that the Arbitration Clause should answer.  If you do not do this now it will be too late once a dispute arises.  Rest assured that the odds are against getting the type of dispute resolution you want once a disagreement has occurred.

So what should you do - arbitrate or not arbitrate?  Obviously, that is up to you and your ceder or reinsurer partner.  Should you be rethinking the Arbitration Clauses currently contained in your treaties? You bet.  But to answer the question:

Would my cynicism be showing if I voted against arbitration?  Look, I believe in the reinsurance tradition, maybe more than most, but once again for good or ill the camel has his nose under the tent.  For centuries the reinsurance industry has resisted the attempts of the legal profession to gain any foothold in our business but the reality is they are here and they are here to stay.  The insidious part of this is that unless you play by their rules when something bad happens you look awfully incautious not having sought prior counsel.

Therefore, I am forced, albeit kicking and screaming, into the twenty-first century and I guess we had better start looking at the vehicles by which we cede business as a contract and utilize standard contract dispute resolution procedures. In reading this you may get the impression that I am denigrating the judicial process and lawyers.  I am not.  Lawyers are not reinsurers, when presented with a set of facts they will fall back on their training. Therefore, if they will view a reinsurance treaty as a contract, they will view arbitration as a trial.   This is natural and should be expected.  You can't make a leopard change his spots.  Traditionally, an attorney views the world as adversarial and therefore must prepare for the worst.  This was not a healthy approach to reinsurance, or its resolution of disputes.  But that was in an environment of shared interest and common goals.   If the parties are going to behave as adversaries, in other words, each looking out solely for his or her own self interest then the agreements covering their relationship should be based on that heritage and dispute resolution based on its tradition, namely the Courts.

Continued ..... 1 2 3


Copyright 2019 Mystic Insurance Intermediaries, Inc.

Valid HTML 4.01 Transitional