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The "Secret" World of Reinsurance

Larry Schiffer | March 1, 2015

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To many people, including more than a few people with experience in the insurance industry, reinsurance is a secretive world cloaked behind a shroud of unfamiliar terms and archaic contracts.

In reality, there is nothing secret or mysterious about reinsurance. The belief that reinsurance transactions live behind an opaque curtain is fueled, in part, by the presumed confidential nature of reinsurance disputes.

Confidentiality in Reinsurance Disputes

Traditionally, disputes between ceding insurers and reinsurers have been kept private. A reinsurance contract is a private business transaction between the ceding insurer and the reinsurer documenting the agreement between the two parties to cede and assume underlying risks of loss. Well before the modern era of reinsurance arbitration, reinsurance disputes were resolved in private and confidential negotiations between opposing business executives. If those face-to-face negotiations failed, ceding insurers and reinsurers would often turn to well-respected insurance and reinsurance executives from other companies to act as arbitrators of the dispute between the two contracting parties. Everyone understood that the arbitration proceeding was confidential and that what happened in arbitration stayed in arbitration.

As the insurance and reinsurance industries matured, and as the disputes increased in value and multiplied because of the changing claims environment, a greater concern about confidentiality arose. The industry had expanded, and new participants did not necessarily accept the traditional ways of the reinsurance market. The familiarity with the counterparty and the individual at the other end of the telephone or fax machine diminished.

Moreover, underlying claimants and policyholder attorneys began seeking reinsurance information for use in their underlying damage actions and coverage disputes. Concerns about information that may be obtained by third parties for use outside the reinsurance relationship led to greater concern about confidentiality of reinsurance information. Some reinsurance contracts even began including confidentiality clauses within their terms and conditions.

More importantly, in reinsurance arbitrations, arbitration panels began issuing confidentiality orders on the transcript of the arbitration organizational meeting or written and signed arbitration panel decisions expressing the desire and requirements for confidentiality. More recently, organizations like ARIAS•U.S. have created form confidentiality agreements for use during insurance and reinsurance arbitrations. Today, it is generally the case that the parties and the arbitrators will all sign the confidentiality agreement at the arbitration organizational meeting, which will be binding on the parties even after the arbitration has concluded.

Confidentiality Agreements

The purpose of the confidentiality agreements typically used in reinsurance arbitrations is to protect from disclosure beyond the participants in the arbitration any "arbitration information" exchanged in the arbitration. So what does that mean?

The current ARIAS•U.S. form confidentiality agreement defines "Arbitration Information" as "all briefs, depositions and hearing transcripts generated in the course of this arbitration, documents created for the arbitration or produced in the proceedings by the opposing party or third-parties, final award and any interim decisions, correspondence, oral discussions and information exchanged in connection with the proceedings." As evident from the definition, the idea here is to prevent any information concerning the arbitration from being disclosed to parties outside of the arbitration participants.

So Why the Secrecy?

Traditions of confidentiality in private dispute resolution proceedings are nothing new and are not limited to reinsurance arbitrations. Where parties contract for private and confidential dispute resolution, they expect that the information exchanged and the results of that dispute resolution procedure are not going to be shared by the parties or the arbitrators with the world. If parties wanted their disputes to be public, they would not have put arbitration or other nonpublic dispute resolution clauses in their contracts.

The notion of a private dispute resolution procedure being confidential is reflected in the ARIAS•U.S. Code of Conduct, which in Canon VI, Confidentiality, provides that "Arbitrators should be faithful to the relationship of trust and confidentiality inherent in their position." See The comments to Canon VI reflect the traditional notion that arbitrators in private contractual dispute resolution proceedings must keep the information received during the proceedings confidential. Arbitrators are considered to be in a relationship of trust, much like a judicial officer, and they must not do anything with the information received that could in any way compromise that position of trust.

Article 7 of the ARIAS•U.S. Rules for the Resolution of U.S. Insurance and Reinsurance Disputes specifically addresses the confidential nature of arbitration proceedings that conform to these rules. The rules, however, recognize that the parties can agree that the proceeding will not be confidential and that confidentiality may not be able to be extended to judicial proceedings concerning the arbitration and other regulatory or legal proceedings.

These concepts are no different in other forms of commercial and international arbitration. Most observers and participants view commercial and international arbitration as confidential proceedings unless the parties agree otherwise. This concept is not without controversy, and there are many articles discussing how and whether commercial and international arbitration is or should be confidential.

Trade Secrets and Confidential Business Information

Most observers agree that, where business trade secrets or other confidential business information (e.g., pricing, rating, underwriting, etc.) is disclosed in the context of an arbitration, that information should remain confidential. In reinsurance disputes, confidential information concerning premiums, underwriting, and other competitive information may be exchanged as part of discovery in the context of a particular dispute. The question arises whether old contracts, ancient claims, and information about companies that no longer exist are truly confidential business information. Nevertheless, it is difficult to argue against the notion that confidential business information should remain confidential, especially where that information if publicly released would aid a party's competitors and put that party at a competitive disadvantage.

Judicial Proceedings Following Arbitration

The concept of confidentiality becomes more difficult if one of the parties to an arbitration seeks judicial intervention before, during, and, most importantly, after the final arbitration award is issued. In the LinkedIn Reinsurance Disputes Group, which I moderate, a rather robust discussion took place recently following a post I made concerning a recent federal court decision to confirm a reinsurance arbitration award ordering the parties to brief whether the petition and related papers should be sealed by the court. The debate centered on whether a party that agreed to confidentiality in the context of an arbitration waives that claim of confidentiality when the party goes to a public court to have the arbitration award confirmed.

The argument in favor of sealing the record on the petition to confirm the award is that confirming an arbitration award is really a ministerial act by the court because, under the Federal Arbitration Act (FAA), a court does not get into the merits of the decision but merely determines if there is any basis to vacate or modify the award under the limited avenues granted by the FAA. Otherwise, the court has no choice but to confirm the award.

The argument against sealing the record is that once parties seek judicial intervention and come into the public court to seek to confirm an arbitration award, they give up confidentiality and the public's right to access to court documents takes priority.

The debate that developed following my post on the Reinsurance Disputes Group discussion page prompted this article. On the one hand, reinsurance disputes are traditionally viewed as confidential. Typically, a confidentiality agreement is signed by all parties and the arbitration panel. Thus, when going to court to confirm an arbitration award, the parties have a contractual obligation to try to keep the matter confidential and invariably must request the court to accept the papers under seal to preserve the agreed-upon confidentiality.

On the other hand, when parties file in a public court, they should not expect their filings to be private and confidential. The general public has a right to access filings made in the courts and, unless there is an exceptional reason, petitions to confirm arbitration awards and their supporting documents should not be sealed. Asking the court to confirm an arbitration award invokes the resources and time of a public institution, and that implies that any request for judicial assistance should be open to the public.


Although there may be a view that reinsurance is a secretive business hiding behind the curtain, the fact is that the reinsurance business is no more secretive than any other commercial business. Confidentiality, however, is a hallmark of reinsurance transactions, which has been extended to reinsurance arbitrations. Whether confidentiality can be preserved when one of the parties goes into court to confirm an arbitration award is subject to debate.

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