Reinsurance

When it came to proving that a reinsured came within the provisos of a settlement clause, a distinction had to be drawn between the facts which generated the claims and the legal extent of the cover provided.

Contracts of reinsurance were independent bargains, separate from the underlying contracts of insurance. In order for insurers to recover from their underwriters, they had to prove the loss in the same manner as the original assured had had to prove it against them.

The insurance market, in order to simplify and hasten procedures, had however developed ‘settlement clauses’ to get round the need to prove their loss by proving an insured loss of the original subject-matter.

Under such a clause, the reinsurers agreed to indemnify insurers in the event that they settled a claim by their assured, provided that the claim fell within the risks covered by the policy of reinsurance as a matter of law.

How a claimant proved that