Difference in Conditions (DIC)

In the LMA cyber treaty reinsurance clauses (LMA 5630 and 5631), the Difference in Conditions (DiC) is the provision that lets the reinsurer follow the war and cyber operation exclusion of the cedant's underlying direct policy. For that, the policy must carry an exclusion compliant with the definition of a Type 3 clause (under Lloyd's Y5381 classification). Failing that, the reinsurer applies its own standalone exclusion. The mechanism differs from traditional follow-the-fortunes (automatic alignment with the direct loss): here, alignment only applies if the direct clause meets a compliance standard set in advance. For the reinsurer, the DiC works as a double safeguard: its own exclusion applies by default, and Type 3 compliance of the underlying policy opens closer alignment. The cedant, for its part, has to keep its underwriting tight: if its direct clause drifts outside Type 3, the reinsurer loses the DiC benefit, which can alter the economic balance of the treaty.