The full reinsurance clause

The full reinsurance clause provides, in one or other form, that the terms of the reinsurance are the same as those in the direct policy and that the reinsurers will follow the settlements of the reinsured. In Aegis Electrical and Gas International Services Co Ltd v Continental Casualty Co [2007] EWHC 1762 (Comm) each of these twin aspects of the clause was under consideration by Andrew Smith J. The first question was whether express words in the reinsurance were restricted by the incorporation of the terms of the direct policy. The second question was whether the reinsurers were precluded from relying upon the express terms of the reinsurance contract to deny liability for a settlement reached by the reinsured in circumstances where the insurance and reinsurance were not back-to-back.