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Time Limits
Specify that arbitrators must be appointed within a specified time limit usually
30 days
The parties have a prescribed time within which to present their cases to the
arbitration panel
The panel has authority to approve time extensions to allow all materials and
witnesses statement to be presented
Arbitration Clause
Arbitrators qualification
Must active or retired executives of insurers or reinsurers
executive mean a senior officer, a vice president or
someone with high rank
A person has not actively participated in reinsurance treaty
negotiations and practices until reaching a senior level
An executive has a broad enough background in insurance
practices to consider both sides of a dispute
Arbitration Clause
Rules of Procedure and Evidence
The arbitrators are relieved of all judicial formality and shall
not be bound by the strict rules of procedure and evidence
the panel should make its decision based on insurance and
reinsurance custom and usage
Arbitrators are not jurists but specialist in the subject giving
rise to the dispute
Arbitrator should use their best judgment to determine the
agreements original intent and rule accordingly
The decision
The decision of any two arbitrators is binding on both parties
and that any court having jurisdiction can enter the judgment
Arbitration panel does not have power to enforce its decision
Offset Clause
Allow insurer and reinsurer to offset balances
due to each other
Offsets can apply to premium and losses
between the same parties within a single
treaty (narrow offset) or across multiple
treaties (broad offset)
Broad offset would allow the primary insurer
and reinsurer to consider all balances due to
one another from all their reinsurance treaties
together in determining the net amount owed
Service of Suit
Allows the primary insurers to seek a legal remedy from
a court in a convenient jurisdiction when the reinsurance
treaty involves an international reinsurer that is not
licensed or otherwise authorized to sell reinsurance in US
Allows the reinsurer to commence a suit in any court of
its choosing in the US that has jurisdiction
Designates an agent for service of purpose, usually is a
law firm that represents alien reinsurers (who is
domiciled in a country other than the US) OR could be an
individual or the insurance commissioner in the primary
insurers state of domicile
Requires the reinsurer to abide by the final court
decision, allowing, however, for an appeal
Insolvency Clause
Indicates that the primary insurers
bankruptcy does not affect does not affect
the reinsurers liability for losses under the
reinsurance agreement
Items are specifically addressed in the clause
Without diminution
Notice requirements
Right to investigate and denied
Reimbursable expenses
Reinsurance proceeds payable