Incorporation of terms from the direct policy

Although there are some lingering doubts, it is now generally accepted that the full reinsurance clause – all terms and conditions as original, or similar wording – has the effect of incorporating the terms of the direct policy into the reinsurance. Incorporation will be possible if, as laid down by David Steel J and the Court of Appeal in HIH Casualty and General Insurance Ltd v New Hampshire Insurance Co [2001] 1 Lloyd’s Rep 596, the term in question is germane to reinsurance, apposite to reinsurance, makes sense when incorporated into the reinsurance, and is not inconsistent with the express terms of the reinsurance. The issue before Richard Siberry QC, deputy High Court judge, in American International Marine Agency of New York Inc v Dandridge [2005] EWHC 829 (Comm), forthcoming in [2006] Lloyd’s Rep IR, was whether a ‘leading underwriter’ clause in the direct policy was incorporated into the reinsurance, thereby binding the reinsurers to follow decisions taken by the direct leading underwriter.