Advantages And Limitations Of The Reinsurance Contract

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4. Limitations
4.1 Conditions to be Fulfilled
One must be warned that even when an incorporation clause is being identified as a clause in the reference document, it does not inevitably follow that that clause will be incorporated into the reinsurance contract. The clause could be entirely inapplicable in the reinsurance contract.

Due to this, the courts have developed rules that have to be met, so as to ensure that only appropriate and applicable terms are incorporated into reinsurance contracts.

As explained by Thomas (2015, p. 46),

“In HIH Casualty & General Insurance Ltd v New Hampshire Insurance Co [2001] 1 Lloyd’s Rep IR 224, the judge at first instance set out various tests that had to be satisfied before a term would be incorporated
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45), in American International Marine Agency of New York Inc v Dandridge [2005] Lloyd’s Rep IR 643, the slip policy contained a clause that provided “subject to the same clauses and conditions and against the same perils as in the original policy or policies”. A question that result from this was whether these words incorporated the leading underwriter clause in the binder. This raised a question of construction, but if the clause had not been incorporated, the decisive fact was that the leading underwriter clause was contained in the binder and not in the underlying policy. The words referring to the underlying policy were not extensive enough in their meaning to include a reference to the binder.

This exhibits how limited the traditional drafting methods adopted is in achieving its objective of ensuring that the reinsurance contract is on the same terms as the underlying insurance.

4.3 No Standard Form
Moreover, there has been no standard form of the incorporation clause. They differ significantly in their drafting. It is, therefore, vital to pay meticulous attention to the specific words being used as experiences with case laws have shown that the exact same words and phrases used in contracts governed by different law can have diverse effects, resulting in the contracts being not "back to back" and the reinsured may not be covered.

This further demonstrated the limitation of the traditional drafting methods adopted to achieve the objective
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4.6 “Sign Down” of Insurance
Also, where several reinsurers are being approached to provide between them the total reinsurance requirement, it is common practice to “sign down” the insurance; hence it would be ineffective or even inapplicable to use the traditional drafting methods to achieve the objective of ensuring that the reinsurance contract is on the same terms as the underlying insurance.

5. Conclusion
The remarkable increase in the amount of disputes caused by vague drafting of waiver agreements is perhaps a signal to the market to be more precise in the drafting of such clauses. The HIH Casualty & General Insurance Ltd. v. New Hampshire Insurance Co. and Ors case is a good example illustrating the problems that can arise when the parties intend to incorporate terms of the original insurance policy into the reinsurance contract. The tests that need to be taken into account when deciding whether a clause has been incorporated into the reinsurance contract have been explored and clarified by the

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