Back to back cover

Facultative reinsurance contracts containing the full reinsurance clause – as original and follow settlements – have long been assumed to have been written on a back to back basis, so that the liability of the reinsurers matches that of the reinsured subject to any specific variations in the reinsurance itself. Wasa International Insurance Co Ltd v Lexington Insurance Co and AGF Insurance Co Ltd v Lexington Insurance Co [2007] EWHC 896 (Comm), a decision of Simon J, decides that particular significance is to be given to differences between the two wordings insofar as the temporal cover of the reinsurance is concerned. The case also holds that if the meaning of a clause in the direct policy is unclear, reinsurers cannot be expected to have agreed to follow the interpretation which may be placed upon it by a court in proceedings between the assured and the reinsured.