Claims control clause

A claims control clause hands the reinsurer the conduct of claims above an agreed threshold: it appoints the adjuster, directs the defense, and its consent conditions any settlement. The cedant remains solely liable to its insured, but loses control of how the file is resolved. The problem it solves is misaligned incentives: on a high layer the cedant has nothing left to lose above its retention and may settle fast and generously, to protect a commercial relationship, with someone else's money. Control restores the interest of the party that pays. It differs from the softer cooperation clause, which requires information and consultation without conferring the decision. The cost to the cedant is heavy: control exercised clumsily can cost it the client relationship, and exposes it to the charge of having abandoned the handling of a file for which it remains legally answerable to the insured and to its regulator.

A 2026 facultative placement on an energy risk gives the reinsurer control above 3 million dollars. A business interruption claim valued at 11 million by the cedant is settled at 6.8 million after the reinsurer appoints its own adjuster and disputes the indemnity period. The cedant keeps its 3 million retention; it loses the client's renewal the following year.

Claims control clause, Contrôle des sinistres, Clause de direction du sinistre, Claims control