Reinsurance arbitration clause
A clause submitting treaty disputes to an arbitral tribunal of practitioners rather than to the state courts.
2026, textbook case: an award rendered in eleven months, at 1.4 million euros in costs, aggregates cyber losses by exploited vulnerability. Two years later, another tribunal decides the opposite on a treaty with similar wording. An arbitration clause sends disputes arising under the treaty to an arbitral tribunal, most often of three members, two of them party-appointed. It traditionally requires the arbitrators to be insurance and reinsurance practitioners, serving or retired. Many wordings invite the tribunal to decide by market custom rather than by the strict letter of the contract. The reason lies in the reinsurance contract itself: it is short, largely implicit, and rests on practices few judges know. Read literally by a non-specialist court, it produces outcomes neither cedant nor reinsurer had in mind. Arbitration also brings confidentiality, valuable when the dispute concerns the quality of a cedant's underwriting. Its limits are well known: high cost, no appeal in the proper sense, and scattered outcomes, since no award sets precedent. The same questions are thus relitigated from one treaty to the next, without end.
A 2026 dispute over the aggregation of cyber losses sets a cedant against six reinsurers on the same layer. The arbitration clause requires a tribunal of practitioners sitting in London. The award, delivered in eleven months for 1.4 million euros of costs, aggregates by exploited vulnerability rather than by insured affected. Two years later a different tribunal decides the opposite on a treaty drafted in near-identical terms.
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