Wasa V Lexington: reinsurers take note!

On 29 February 2008, the English Court of Appeal handed down its judgment in the case of Wasa International Insurance Co Ltd and AGF Insurance Co Ltd v Lexington Insurance Co (Court of Appeal, 29 February 2008) , reversing the decision of the judge at first instance and over turning the expected approach of the English courts to ‘follow the settlements’ cases involving US insurers and reinsurance contracts governed by English law. Here, Katy-Marie Wilson , a partner in the Reinsurance and International Risk team at London law firm, Barlow Lyde & Gilbert, considers the implications of this unexpected, but significant, judgement for the insurance industry

The judge at first instance had decided that the insurance and reinsurance contracts were not completely back-to-back and, as a matter of law, the reinsured’s settlement of the insurance claim did not fall within the terms of the reinsurance, so that the reinsurers did not have to follow it.