Reinsurer wants control on the claim especially when the cedant has very small retention. Control includes right to appoint loss adjustors, investigators as well as negotiate claims.

The key aspects of a claims control clause are:

a) Immediate notification of claims by cedant to reinsurers.
b) Kept informed of all developments in the claim.
c) Right to appoint loss adjustors or appoint representatives to control all investigations, adjustments and settlements.

It is to be remembered that reinsurers keep the right and not the duty. Hence, reinsured continues to have the duty to handle claims.

This as well as Claims Cooperation Clause are normally facultative reinsurance clauses.

However, I have seen these clauses in some Treaties too. “Follow the Fortunes” should be the Treaty clause. Reinsured should resist Claims Control or Claims Cooperation clause appearing in Treaties.

One very strange case I came across was one of the insurers had a 5% co-insurance share in a risk. Their retention plus treaty capacity was 2.5% and hence for the remaining 2.5% of the risk, they took facultative reinsurance support. And this FAC slip had Claims Control Clause. The insurer has no control on the claim. And they are giving control to a reinsurer on which they themselves have no control.

Blog by Atmaram Cheruvu