Dinets said. “The scope of cover granted by such wordings can be wider than in the treaties protecting their portfolios. There is a risk for differences emerging between the original policy wording and the reinsurance.”
Dinets said problems can also emerge because policies are translated
incorrectly from English to Russian. “Brokers sometimes try to use some uniform or standard policy wordings of Western markets, but some incorrect translations between English and Russian can also present a risk for the original insurer,” he explained.
But it is usually the insurer that picks up the risk in such instances.
Reinsurance policies will usually have protections in place stating, for example, that the coverage cannot be wider than the Munich Re standard CAR cover or that, in the instance of a dispute, priority must be given to the wording in the reinsurance contract.
Confusion can also arise in terms of which country’s law and legislations
a policy falls under—something that becomes especially pertinent in cases of dispute. He says that while most insurance policies applicable to Russian risks fall under Russian law, the reinsurance agreements backing them up may fall under English law or Swedish law or that of any jurisdiction where the reinsurer is based.
The nature of the arbitration clause can also differ between the original policy and the reinsurance slip, Dinets said. Things such as claims control clauses and claims co-operation clauses can differ. “And the sole party responsible for claims payment is the direct insurer. In some disputes, the insurer may be forced by a court to fixed terms of payments without the consent of the reinsurer. This leaves the cedant without reinsurance support.”
But Dinets ended on a positive note. He argued that many of the
problems he had identified can, in fact, be avoided very easily. He recommends that insurers always verify the wording, terms and conditions, definitions, exclusions and other provisions to make sure that they match internationally accepted meanings to every extent possible.
“Then check that all provisions of the reinsurance contract to make sure that
this reflects the original policy,” he said. “If large risks are being ceded then a full reinsurance clause is recommended to be incorporated in the policy. Or at least get confirmation that the reinsurer has seen the wording and accepted it.”
He advised reinsurers do the same. “Be involved in the project and
wording discussion as early as possible and, if need be, influence the wording to be applied.”
Prandetsky then opened the floor to questions. A number of attendees
both commented and asked questions. Stephen Coward, president of Navigators in Lloyd’s of London, argued that the issue often boils down to insureds seeking broader terms of coverage that what is offered. This problem is exacerbated by the global nature of many companies and the fact that they may have different or broader terms of coverage in another country on another project they are working on. He also touched on the issue of security and how companies will sometimes seek additional layers of security to ensure the insurance company is able to pay when a claim occurs.
Oscar Treceno, head of engineering at Nationale Suisse, spoke next and argued that the key issue is the interaction between the insurance and the
September 2011 | INTELLIGENT INSURER | 65
reinsurance companies in terms of how they choose to operate and work together. He added that this is a global problem and not only something specific to the Russian market.
“This is a situation that we see worldwide,” he said. “It is very difficult to
have these translations done correctly; sometimes it is just the placement of a comma that changes completely the sense of a clause or of a wording. For me, the issue here is related to expertise. It is crucial that underwriters take the time to read the wordings and try to really understand them.”
Gerhart Hurek from Mapfre Re spoke next. He argued that greater collaboration is needed between facultative and treaty underwriters. He said that the treaty department usually confirms wordings first and if these are concisely followed by other departments, it would prevent confusion. He added that Russia actually has a very low loss experience. “As such, we are not faced with court proceedings as often to discuss differences in conditions. So we should start to do that today before we have the losses. Otherwise, we run a big problem!”
OTHER PARTICIPANTS WHO TOOK PART IN THIS DISCUSSION INCLUDED:
STANISLAV MOISEEV, head of engineering at ACE JSC
HARALD DIMPFLMAIER, senior underwriter, engineering at Swiss Re
LUIS BERNUEZ, head of engineering at Mapfre Re
ALEXANDR POTITOV, deputy general director at Kit Finans Insurance
UTZ GROETSCHEL, secretary at IMIA
CHRISTIAN ENGELN, head of P&C Russia & CIS at PartnerRe
GERHARD STENZEL, senior underwriter, engineering at PartnerRe
MATHIAS WARLICH, head of underwriting, property facultative at Munich Re
SEBASTIAN AWATER, senior underwriter, engineering at Hannover Re
VADIM LEVLEV, director of the property, engineering & loss control department at Allianz JSC
RAJAGOPALAN VASUDEVAN, senior underwriter, engineering at ARIG
EKKEHARD HETTLER, engineering re/insurance advisor
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