The authority of underwriting agents

The decision of Toulson J in ING Re (UK) Ltd v R&V Versicherung AG [2006] EWHC 1544 (Comm) is in essence an application of relatively straightforward principles of agency law to complex facts. The defendant reinsurers refused to accept the validity of a reinsurance treaty entered into on their behalf by underwriting agents who had been engaged in a fraudulent scheme to defraud the reinsurers. The Court was required to decide whether the underwriting agent had apparent authority to bind the reinsurers or, if not, whether the reinsurers had ratified the treaty.

ING Re: the facts

R&V, a leading German reinsurance company, issued two binding authorities to a group of companies collectively known as Risk and controlled by an individual, C. The binders authorised Risk to write contracts of reinsurance on the London market. In earlier proceedings, R+V Versicherung AG v Risk Insurance_Reinsurance Solutions SA [2006] Lloyd’s Rep IR 253, it was held by Moore-Bick J that there had been a fraudulent conspiracy between G, a senior underwriter at R&V, and C, designed to generate commission for themselves, and that the risks written under the binding authority were not authorised by R&V. G had been suspended from duty in November 2002, and was subsequently dismissed. One of the contracts written under the binders was a quota share reinsurance of ING, signed in March 2003 and covering much of ING’s business. In April 2003 R&V publicised its withdrawal of Risk’s authority, and in June 2003 ING was informed by R&V that it did not regard the treaty as binding. The question in the present proceedings was whether R&V was bound by the treaty. The earlier judgment had removed any argument that Risk had possessed actual authority to enter into the treaty, and it was accordingly argued by ING either that Risk had apparent authority to bind R&V or alternatively that R&V had ratified the treaty.