Natural catastrophe losses and reinsurance claims: the legal issues

With hurricanes Gustav and Ike, and tropical windstorm Hannah, having battered much of the Caribbean and southern United States, 2008 will be the most active hurricane season for the (re)insurance industry since hurricanes Katrina, Rita and Wilma in 2005. Here Colin Peck, partner in the London Market team at UK national law firm Weightmans LLP, considers some of the potential legal issues relating to the payment of reinsurance claims arising from such natural catastrophes, where the original insurance is subject to local jurisdiction and where the reinsurance has been placed in the London Market. The questions considered by Mr Peck include: does the wording cover the loses being claimed; what is the actual cause of the loss being claimed; does the reinsurer have to follow the settlements of its reinsured; what effect does “ex gratia” or “to follow without question” have on the follow the settlements clause; what is the extent of the reinsurers obligation in the absence of a follow the settlements clause; is a reinsurer obliged to follow a judgment entered against a reinsured; to what extent can claims be aggregated; and what is the effect of the “hours clause”?