Jurisdiction and insolvency problems in reinsurance

Abstract

This thesis aims at identifying jurisdiction problems and insolvency problems in reinsurance. While the two problems are separate and shall be dealt with separately, the insolvency of either party to a reinsurance contract will also raise certain jurisdictional issues, due to the international nature of reinsurance. The parties to a reinsurance contract often reside in different countries and failing to insert a properly drafted jurisdiction clause, identifying the country which is to have jurisdiction over the contract, in case of dispute, could raise problems. In almost all EU Member States, reinsurers are subject to direct or indirect supervision. The importance of regulating reinsurance has increased over the past few years. Reinsurance regulation implies more security for insurers which indirectly leads to more security for policyholders. The insolvency of an insurance company with branches in other countries raises a number of problems. Prior to Council Directive 2001117 /EC on reorganisation and winding-up of insurance undertakings, the debtor's assets could be subject to separate, concurrent proceedings instituted in several jurisdictions. Another problem covered is the valuation of claims on insolvency of either party to a reinsurance contract and the possible application of set-off of claims. In Malta, the provisions of the Companies Act regulate the winding up of a company and therefore also the proof and valuation of claims. The insolvency of the reinsured raises a number of obligations on the part of the reinsurer, who must indemnify the reinsured for certain defined losses the reinsured is required to pay under policies it has issued. Problems may arise on the insolvency of a reinsurer, as the reinsured does not have the same rights as an insured policyholder and this is probably due to the fact that reinsurance is deemed to take place between sophisticated parties.