A clause letting each party settle only the net balance of sums mutually owed under the treaties.
An offset clause allows cedant and reinsurer to discharge only the balance of their mutual claims, premium against losses, commissions against recoveries, and often across treaties where the wording permits. It simplifies cash flow in normal times and becomes decisive on default: a reinsurer owed unpaid premium by a cedant in liquidation would rather offset than pay its losses in full and then queue as an unsecured creditor for the premium. The problem it solves is therefore reciprocal credit risk, and in practice the clause works as security without collateral. Its real reach depends on the applicable insolvency law, which may restrict offset to connected debts, that is those arising from one contract, and refuse offset across treaties. That is why the drafting always states whether it operates contract by contract or across the whole relationship, and why its interaction with the insolvency clause is examined at negotiation rather than in litigation.
A reinsurer owes 14 million euros of losses to a cedant placed in liquidation in 2026, and that cedant owes it 9 million of premium across three separate treaties. With a cross-treaty offset clause recognized by the governing law, it pays 5 million. Without it, or where the law confines offset to connected debts under the single loss-making treaty, it pays 14 million and recovers its 9 million at the liquidation's distribution rate.
Offset clause, Clause de netting, Compensation des comptes, Set-off clause