UNITED INSURANCE CO OF LIBYA V AON LTD

[2007] EWHC 1583 (Comm), Queens Bench Division, Commercial Court, Langley J, 5 July 2007

Reinsurance (broker) – Reinsurance of fronting company – Whether broker misstated to fronting company the level of commission to be earned on placing reinsurance – Whether broker contractually bound to fronting company not to tender for business using another fronting company

This was a purely factual dispute concerning brokerage. In 2004 Aon successfully tendered for a potential reinsurance placement on behalf of UIC,  and UIC subsequently successfully tendered for the direct business (to be writen on a fronting basis) placed by the Libyan state oil company, NOC. In the same year Aon placed the reinsurance of another risk, the insurance of GCCI, for UIC. In 2005 Aon decided against working with UIC to obtain the NOC business, and instead tendered for it using another Libyan insurance company, AIC. NOC decided to use AIC for that year, and Aon acted as broker for the reinsurance. A number of claims were made by UIC against Aon, each of which was dismissed  by Langley J. (1) Aon had misstated to UIC the level of commission that it would be obtaining for the 2004 reinsurance placement,  and should repay the entire brokerage  earned. Langley J found that there had not been any false statement by Aon. (2) Aon had been instructed to place the GCCI risk separately from the NOC risk, and had thereafter been forced to place it again, separately. Langley J held that Aon had been instructed to place the two risks separately. (3) Aon was in breach of contract by ceasing to work with UIC and turning to AIC to act as fronting company for NOC’s 2005 renewal. Langley J held that Aon had been entitled to act in that way given that it had not been possible to reach agreement with UIC.