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Consolidation of Reinsurance Disputes under Reinsurance Contracts

Larry Schiffer | June 7, 2019

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Reinsurance contracts typically stand alone. A dispute under one reinsurance contract generally does not involve a dispute under another separate reinsurance contract. But, when multiple reinsurers participate on a single reinsurance contract, consolidation among the reinsurers may be required.

Where a multitiered reinsurance program is involved, or where losses take place across multiple reinsurance contracts over multiple years, consolidation also may become an issue.

Consolidation Among Reinsurers

A reinsurance contract may be between a single ceding insurer and a single reinsurer or may involve multiple reinsurers, each taking a share of the reinsurance participation. Where a reinsurance contract involves multiple reinsurers, typically each reinsurer assumes a several share of the reinsurance obligation and does not have joint liability. Thus, while participating on the same contract, each reinsurer has a separate contractual relationship with the ceding insurer and generally no real contractual relationship with the other reinsurers.

While some reinsurance contracts contain a signing page with each reinsurer's signature, many reinsurance contracts instead use an "interests and liabilities" (I&L) agreement. An I&L is a separate document signed by each reinsurer that evidences that reinsurer's several participation on the specific reinsurance contract reflected in the I&L. The I&L is typically attached to the ceding insurer's copy of the reinsurance agreement.

Reinsurance agreements with multiple reinsurers have to be reviewed carefully to determine whether, in the face of a dispute, the reinsurers may act alone or must act in concert. Some reinsurance agreements have provisions, typically in the arbitration clause, that require all reinsurers to agree on a single arbitrator. For example, the Brokers & Reinsurance Markets Association (BRMA) Arbitration Clause 6A provides the following.

If more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute and act as one party for the purposes of this Article, provided, however, that nothing herein shall impair the rights of such reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the Reinsurer under the terms of this Contract from several to joint.

What this clause means is that all reinsurers must act together but only if they are involved in the same dispute. Also, nothing prevents reinsurers who must act as one party to have separate defenses or claims on that same dispute. The clause avoids an imbalance of having multiple reinsurers acting as separate parties against one ceding insurer but safeguards the differences between the reinsurers concerning the specific dispute with the ceding insurer.

If the arbitration clause is silent on consolidation and there are multiple reinsurers, the likelihood of multiple arbitrations is strong, unless the parties agree to consolidate.

Consolidation Among Contracts with a Single Reinsurer

Reinsurers sometimes provide their ceding insurers with support spanning multiple reinsurance contracts. This could happen within a policy year or over many years of participation on that ceding insurer's reinsurance program. Where a dispute arises over losses that cut across multiple reinsurance contracts, either in the same policy period or over multiple periods, a question arises as to whether the dispute can be consolidated or whether separate disputes are required under each separate contract.

There have been several recent cases addressing consolidation with a single reinsurer over multiple contracts arising from the same dispute concerning coverage for asbestos losses. It is clear in most jurisdictions that the question of whether disputes under multiple reinsurance contracts should be consolidated is a question for the arbitrators and not the court.

In Employers Ins. Co. of Wausau v. Hartford, No. 2:18-cv-07240-CAS-AGR, 2018 U.S. Dist. LEXIS 205345 (C.D. Cal. Dec. 3, 2018), the court was faced with procedural maneuvers seeking to resolve an impasse between the parties to determine whether a dispute under various reinsurance contracts between those parties should be consolidated. The underlying loss arose out of settlement payments made by affiliated ceding insurers for the same underlying policyholder's claim. The underlying settlement was ceded by three different affiliates of the ceding insurer to 19 reinsurance contracts covering 8 reinsurance programs. The arbitration provisions were not the same in each contract, and the venue for arbitration was not the same in the various groups of reinsurance contracts.

The ceding insurer, understandably, sought a consolidated arbitration before one panel and sent a single arbitration demand asking the reinsurer to name one arbitrator to form a single panel. The reinsurer responded by proposing three arbitrations and appointed three arbitrators broken down by the three ceding insurer's affiliates. The ceding insurer appointed a single arbitrator, and the three arbitrators for the reinsurer asked the cedent's arbitrator to select umpires for the three arbitrations the reinsurer wanted to organize. The ceding insurer refused and asked that a single panel be appointed to decide how the matter should be consolidated.

The reinsurer filed four petitions to compel arbitration in various jurisdictions, and the ceding insurer moved in this case to compel appointment of a single arbitrator and to stay all the other pending proceedings.

The court denied the ceding insurer's application and granted the reinsurer's petition to appoint an arbitrator in the proceeding before it. In reaching its determination, the court noted that the ceding insurer was correct that the issue of whether there can be a consolidation of the disputes into a single arbitration is a question for the arbitrators and not the court to decide. Under section 4 of the Federal Arbitration Act (FAA), the court held that it had the power to compel the parties to proceed to arbitration in accordance with the terms of their agreements. This court only had one agreement before it, and it compelled arbitration based on the arbitration clause in that one agreement.

The court rejected all of the ceding insurer's other arguments on consolidation. The court noted that it could not compel the reinsurer to form a single arbitration panel based on the single arbitration demand from affiliated companies. Nor could it compel arbitration in contravention of the jurisdictional limitations agreed to by the parties. In responding to the practicality of a consolidated arbitration, the court stated that it could not expand the written agreement even if it would achieve greater efficiency.

The court ordered the parties to proceed to arbitration under the umpire selection procedures set forth in the reinsurance contract the court had before it. In other words, the two party-appointed arbitrators on this contract had to select an umpire or go to the arbitration clause's umpire selection process to draw lots to choose the umpire. In a footnote, the court reminded the parties that if there was a lapse in the naming of the umpire, upon motion, the court would designate and appoint the umpire under section 5 of the FAA. The court also stated that, once the two party-appointed arbitrators chose the umpire, the proceedings could begin, and the panel could consider the ceding insurer's consolidation application.

Finally, this court refused to stay the proceedings in the other courts and noted that the ceding insurer did not adequately explain why the possibility of inconsistent results warranted a stay. The inconsistent results could be from the multiple requests to compel arbitration under the separate agreements and then the consolidation requests made to those courts and eventually to arbitration panels.

Several months later, in Employers Ins. Co. of Wausau v. Hartford, No. HHDCV 186099158S, 2019 Conn. Super. LEXIS 354 (Ct. Super. Feb. 13, 2019), a Connecticut state court denied the same reinsurer's motion to compel arbitration and granted the ceding insurer's cross-motion to compel arbitration.

In granting the ceding insurer's motion and denying the reinsurer's motion, the court ruled that consolidation was for the arbitration panel—not the court—to decide. You can see a judicial theme here. The court noted that the parties did not dispute that they entered into a valid arbitration agreement and that their dispute fell within the scope of that agreement. "Thus, the court need not and cannot proceed with any further analysis. The procedural question of consolidation is for the arbitrators, not for the court, to decide."

The court rejected each of the reinsurer's arguments, finding that, by ordering the reinsurer to arbitrate, it was merely enforcing the agreement as the parties drafted it. Essentially, the reinsurer's act of naming three arbitrators instead of one in response to the ceding insurer's arbitration demand allowed the court to compel the reinsurer to comply with the treaty and appoint a single arbitrator and proceed to form a panel.

In these cases, we have at least two arbitration panels that may address the same consolidation issue.

Where the consolidation issue involves a single ceding insurer as opposed to affiliates, the practicalities of multiple arbitrations where there are multiple reinsurance contracts at issue is more difficult to justify. Nevertheless, the overwhelming authority turns the consolidation decision over to the arbitration panel to decide, and most courts will not alter the reinsurance contracts to allow for a forced consolidation where one of the parties objects.

There are, however, some reinsurance contracts that provide for consolidation across reinsurance contracts among the same parties. These are unusual as each reinsurance contract typically stands on its own. Where they do occur, it is likely in the context of a related administrative agreement or part of a specific program. The following is an example.

In the event that there is a dispute between Cedent and Reinsurer that implicates the provisions of this Quota Share Reinsurance Agreement and the Administrative Services Agreement, Cedent and Reinsurer hereby agree to consolidate any such disputes under such agreements in a single arbitration proceeding.

The same formulation can be found within certain reinsurance programs where the reinsurance contracts are all meant to work together and where a reinsurer participates on multiple contracts within that integrated program.

Consolidation Among Multiple Reinsurers with the Same Dispute

The same issue that arose above in the asbestos settlement context could arise with multiple reinsurers. Catastrophe losses arising from natural or man-made disasters also fit this same mode where multiple reinsurers may be disputing similar issues with the cedent.

Typically, consolidation provisions in reinsurance contracts, if they appear, address only the specific reinsurer or reinsurers involved in that contract or program. Consolidation across multiple contracts and multiple reinsurers is unlikely to be contractual and would have to be consensual. As already explained, courts will not order consolidation, even if it seems practical, and will defer to an arbitration panel to address a consolidation request. Whether an arbitration panel would force consolidation of a dispute involving multiple reinsurers and multiple reinsurance contracts without all parties' agreement is highly unlikely.


Contractual consolidation is a limited right contained in certain reinsurance agreements. It typically requires multiple reinsurers involved in the same dispute under the same contract with the same ceding insurer to act together as one party. Noncontractual consolidation of reinsurance disputes requires either consent of all parties or an order by an arbitration panel. The courts will not order consolidation and will defer to the arbitrators to make that procedural determination.

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