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Reinsurance


Overview

Carlton Fields has a long-standing reputation for its knowledge of the insurance, reinsurance and financial markets, and the regulatory landscapes in which they operate. We apply that knowledge in high-risk reinsurance-related litigation and arbitration, the structuring of both routine and innovative reinsurance transactions, and general counseling on a wide variety of issues. In the reinsurance arena, our experience with many kinds of insurance and financial products strengthens our ability to serve the needs of our clients in reinsurance dispute resolution, reinsurance transactions, reinsurance counseling, and regulatory matters. 
 

Our broad litigation practice for insurance companies contributes to our capabilities in the reinsurance area, enabling Carlton Fields to provide services on a cost-effective basis. For example:

  • Carlton Fields has experience litigating and arbitrating issues with respect to insurance company products, operations issues, actuarial issues, accounting practices, the acquisition of entire books of business, sales practices, bad faith, breach of contract and other claims issues. 
  • We have experience as counsel of record in hundreds of class actions, which routinely present complex procedural, insurance, and evidentiary issues. 
  • We handle cases involving hundreds of thousands or even millions of pages of documents and electronic data, for which we have developed a range of in-house and vendor assisted computerized litigation support. Each matter is unique, and requires a customized approach in order to provide high quality, cost effective services to our clients. 
  • Several of our lawyers have written articles on electronic discovery issues, and have moderated and lectured at continuing legal education programs addressing e-discovery issues.


The following factors distinguish Carlton Fields’ reinsurance practice from that of other law firms: 

  • Because our lawyers have been at the forefront of the creation and regulation of many of the innovative insurance products on the market, we understand these products and how they work. Such knowledge makes it easier to understand how to reinsure those risks effectively and efficiently, and how to devise realistic strategies for resolving disputes relating to such products that will accomplish the business goals of our clients. 
  • The breadth of our practical experience permits us to structure reinsurance agreements or programs effectively, and to advise clients on the best alternatives for reinsuring risks, either through traditional reinsurance or through other facilities or structures. For example: one of our lawyers formerly served on the Board of a Bermuda reinsurer; another is a former CPA with deep knowledge of regulatory accounting; others follow the NAIC’s activities relating to reinsurance and monitor legislative and regulatory activities. 
  • We are on the front lines of alternative risk transfer mechanisms, having represented a ceding insurer in the creation of an innovative catastrophe bond series. 
  • Our experience in handling high stakes financial services litigation translates into cost effective arbitration and litigation capabilities and results. 
  • Our reinsurance lawyers provide clients additional value through our award winning reinsurance and arbitration blog, Reinsurance Focus. The blog provides updates on a broad range of reinsurance matters, including significant reinsurance and alternative risk transfer transactions, reinsurance legislation and regulations, trade associations, educational programs, and scholarly articles about reinsurance, as well as important court opinions addressing reinsurance issues and the arbitration process. 
  • Our lawyers have worked at major insurance companies and a trade association, and have served on the Boards of Directors of insurance companies. 
  • Carlton Fields monitors the activities of the NAIC, and our lawyers actively follow, among other matters, the activities of the NAIC’s Reinsurance Task Force. The firm’s lawyers have training and experience with Generally Accepted Accounting Principles and Regulatory Accounting Principles.
  • Reinsurance Dispute Resolution Experience
    Carlton Fields lawyers represent industry clients in the resolution of reinsurance disputes, including arbitrations, litigation, mediation, and settlements. The depth of our knowledge regarding insurance products, insurance company operations, and governing accounting principles provides a unique and informed perspective, allowing us in the course of our legal representation to understand and address the business issues central to such disputes. 

    Our reinsurance dispute resolution experience encompasses both life/health and property/casualty business, domestically and internationally.  We have been involved in a broad array of reinsurance disputes, having prosecuted and defended claims ranging from the validity of a single loss under a facultative certificate or reinsurance treaty, to fraud and misrepresentation claims involving the potential rescission of  an entire book of business.  Our matters have addressed all commonly recurring issues, as well as many unique points of contract interpretation.  For example, we have represented clients in cases addressing issues such as allocation, aggregation, number of occurrences, loss adjustment expenses, follow the fortunes/settlements, late notice, utmost good faith, claims cooperation, salvage and subrogation recoveries, inuring insurance and/or reinsurance, warranties, rescission, commutations, access to records, offset, reserving methodology and calculation disputes, reinsurance collateral, premium issues, the scope of ECO and XPL clauses, insolvency issues, and disputes involving captive-related issues, underwriting guidelines/standards, bad faith, claims handling and other coverage issues.   
     
  • Reinsurance Transactional and Counseling Experience

    Carlton Fields’ knowledge with respect to insurance company operations, actuarial and accounting principles, and insurance products contributes to our advice to clients on contractual and regulatory issues. Our representation of clients in litigation and arbitrations involving many of the kinds of issues that arise on the transactional side of our practice adds a valuable perspective to our transactional counseling. Carlton Fields’ reinsurance transactional experience includes engagements in the following areas:  

    Counseling – Our lawyers provide counseling with respect to purchases and sales of reinsurers, loss portfolio transfers, sales of reinsurance books of business, purchases and sales of reinsurance underwriting management companies, jumbo reinsurance issues, termination of reinsurance relationships, relationships with brokers, and the formation and operation of reinsurance auditing and run-off companies. 

    Contract Structuring, Drafting, Negotiation – We negotiate and draft reinsurance agreements and trusts for quota share, excess of loss, facultative and retrocessional arrangements, covering general lines (e.g., life, health, annuity and property) and specialized lines (e.g., workers’ compensation, occupational accident, financial guaranty and residual value). Our work with clients on matters involving intermediaries and other industry participants, such as managing general agency, reinsurance intermediary, and general underwriter agreements, rounds out our contractual counseling experience.  

    Alternative Risk Transfer Mechanisms – We have extensive experience in documenting and interpreting sidecars, traditional reinsurance, fully collateralized reinsurance and catastrophe bonds, in isolation and in combination as part of an integrated risk transfer program. We have represented a ceding insurer in the creation and issuance of three large fully collateralized catastrophe bonds, including two which were the largest in the history of the market when they were issued. We also have substantial experience in the formation and operation of offshore captive insurers.  

    Assumption Reinsurance – Carlton Fields lawyers have handled numerous assumption transactions, including, for example, drafting agreements to position companies in advance of their sale. We have also drafted and obtained New York Insurance Department approval for an alien surplus lines insurer that transferred its business to a licensed insurer through assumption reinsurance to release its NAIC Surplus Lines Trust Fund. 

    Run-offs and Commutations – Our lawyers have represented a number of reinsurers in run-off and have helped design programs to commute or otherwise minimize exposure to cedents while protecting retrocession recoverables in a number of different lines. 

    Reinsurance Company Insolvencies – Carlton Fields lawyers have counseled both reinsurers and liquidators with respect to their rights and obligations in the insolvency and pre-insolvency contexts.  

    Due Diligence – Our lawyers have performed due diligence on reinsurance matters in mergers and acquisitions of insurance companies.

    We also routinely counsel insurance and reinsurance clients on regulatory matters and represent them before state insurance departments. We have been retained as special counsel to state insurance departments on various matters. For example, a Department of Insurance retained Carlton Fields in connection with the Department’s consideration of a controversial acquisition involving its largest domestic medical malpractice carrier.

Experience

Life/Health Reinsurance

​We currently act or have acted as lead counsel in a number of significant life, long term care and annuity reinsurance matters, on behalf of cedents, reinsurers, retrocedents and retrocessionaires, involving the following:  
 

  • Various engagements concerning a reinsurer’s ability to enforce rate change provisions in YRT reinsurance agreements, which has been an emerging issue in the reinsurance sector in recent years; 
  • A cedent’s duty to disclose issues pertaining to internal replacement life insurance policies, and a reinsurer’s facultative underwriting obligations with respect to the same; 
  • The application of errors and omissions clauses to the policy issuance and underwriting process, and impact on a reinsurer’s indemnity obligations; 
  • Represented a participant in hundreds of reinsurance treaties in the London Personal Accident reinsurance market, involving a series of arbitrations in the UK, and the defense of a major US arbitration involving claims exceeding $100 million. Our representation included advising on a strategic plan for managing and defending multiple arbitrations and lawsuits in this market, and representing the client in the U.S. arbitration and a related lawsuit; 
  • The scope of a reinsurer’s indemnity obligations, and applicability of the follow the fortunes/settlements doctrine, to administrative errors in the policy issuance process; 
  • Agent/broker misconduct, follow the fortunes/settlements as it pertains to agent/broker misconduct/errors, and the interplay between E&O coverage and reinsurance cover; 
  • Fraud in the inducement (actuarial or underwriting misrepresentations); 
  • The duties of a cedent and reinsurer in the facultative submission process; 
  • Violations of treaty underwriting standards and guidelines; 
  • The rights of a reinsurer to contest claims ceded on an automatic basis; 
  • Recapture; 
  • The duty of utmost good faith; 
  • The scope of ECO/XPL provisions; 
  • Claims handling issues; and 
  • Other contract interpretation issues or disputes concerning industry custom and practice in the life, LTC and annuity reinsurance context.


Property/Casualty

​Some representative matters in which our attorneys have recently acted in the property/casualty area include the following: 

  • Acted for cedents and retrocedents in numerous disputes with reinsurers and retrocessionaires regarding the collection of reinsurance recoverables. 
  • Represented a client in arbitration related to the aggregation of claims under the event wording of a catastrophe treaty. 
  • Secured a multi-million award for client with respect to asbestos billings, where the issues involved aggregation and follow the fortunes. 
  • Represented a client in an arbitration involving late notice and bad faith claims handling. 
  • Represented clients in arbitrations concerning the number of occurrences, allocation, annualization and aggregation issues related to clergy abuse, toxic tort, asbestos, pollution and construction defect claims. 
  • Represented a cedent in an arbitration involving the scope of ECO and UNL provisions. 
  • Represented a major insurer of windstorm risks in resolving issues with its reinsurer. 
  • Represented cedents in disputes regarding the recoverability of commutation-related payments and follow the fortune/settlements implications. 
  • Represented a client in a dispute concerning the recovery of declaratory judgment and bankruptcy-related expenses. 
  • Represent insurer in dispute with their managing general agent concerning various underwriting violations. 
  • Represent an insurer in various disputes with its agents concerning contingent commissions. 
  • Represent clients in matters regarding salvage and/or subrogation recoveries, including one in which the panel granted summary judgment on behalf of our client. 
  • Represented various clients in matters relating to insolvencies. 
  • Represented a leading aviation insurance pool in litigations to secure increases in LOCs, necessitated by 9/11 and other large aviation losses. 
  • Represented clients in multiple arbitrations involving surety bond claims. 
  • Prevailed in matters for insurers in disputes with their managing general agents regarding a variety of issues, including profit commissions. 
  • Devising and implementing a strategy for a global insurer to resolve a major reinsurance dispute with the reinsurance market. 
  • Obtained summary judgment in an arbitration on behalf of a client, which was also awarded the fees and costs of the panel in addition to compensatory damages. 
  • Acted in matters involving disputes between captive insurers and their reinsurers, as well as a dispute between an insurer and a captive acting as its reinsurer. 


Pre-Dispute Counseling

In addition to litigating or arbitrating disputes, we are routinely engaged to assist cedents, reinsurers, retrocedents and retrocessionaires in the pre-dispute process, whether by providing coverage opinions or counseling clients on contentious issues with their counterparties to resolve matters in advance of litigation or arbitration. 

Drafting

Apart from contentious matters, we also represent or have represented clients in the drafting of reinsurance agreements, the review and preparation of treaty amendments, and the development or review of treaty wordings and guidelines. 

Brokers and Agents

We have also handled many arbitrations and litigations between insurers and brokers and agents involving numerous issues, including underwriting violations, commissions and agent misconduct. 

Producer Owned Reinsurance Companies

We are also very familiar with the structure and operation of producer owned reinsurance companies and other “captive” reinsurers, including tax issues relating to such entities, and have litigated various issues relating to such entities, including issues arising as a result of the bankruptcy of the owner of such entities. Some of these reinsurers have been domiciled in non-United States jurisdictions, such as Bermuda and the Turks and Caicos.


Reinsurance Transactional and Counseling Experience

  • Counseling a reinsurer and its affiliates in complex cessions and retrocessions of life product risks involving entities operating in the United States, Asia, Europe, and Bermuda. 
  • Assisting in a loss portfolio transfer of medical malpractice risks from a group of medical facilities and providers to a major P&C insurer and reinsurer. 
  • Closing a commutation of a reinsurance treaty for a P&C insurer that sought to terminate its treaty with a large international reinsurer that had been downgraded by A.M. Best, and commuting a treaty with a group of Lloyd’s Syndicates covering long-tail liabilities of a casualty insurer. 
  • Representing ceding and assuming companies in the structuring and documentation of complex P&C and life and health reinsurance treaties of various types, including consideration of risk transfer and related regulatory compliance issues. 
  • Representing the ceding insurer in the creation of a billion dollar reinsurance program which includes traditional reinsurance, umbrella cover and the largest catastrophe bond ever placed. The cat bond provided a fully collateralized two year reinsurance cover at a fixed price which was sold to capital market participants, some of which do not participate in the traditional reinsurance market.

All Insights

Reinsurance

Reinsurance

December 1, 2018

Second Circuit Finds Factual Issues Regarding Whether Limit of Liability in Reinsurance Agreements Include Loss Adjustment Expenses

Guiding FEMA Through Groundbreaking CAT Bond Reinsurance Transaction

Guiding FEMA Through Groundbreaking CAT Bond Reinsurance Transaction

August 15, 2018

The bond is a first-of-its-kind for the federal government; it is the first flood-only CAT bond and the only CAT bond issued on behalf of the NFIP.

New York Federal Court Awards Damages for Reinsurance Payments in Lawsuit Against Iran Related to Se

New York Federal Court Awards Damages for Reinsurance Payments in Lawsuit Against Iran Related to Se

August 6, 2018

The Southern District of New York recently granted a motion for damages by insurance plaintiffs in a multidistrict litigation case against Iran stemming from the September 11, 2001 terrorist attacks.

Rhode Island Amends Laws to Permit Voluntary Restructuring of Insurers Using Protected Cells with Co

Rhode Island Amends Laws to Permit Voluntary Restructuring of Insurers Using Protected Cells with Co

August 2, 2018

Rhode Island has amended its laws related to voluntary restructuring of insurers and protected cell companies to allow for domestic insurance companies to enter into a voluntary restructuring, including the use of a protected cell, with the approval of the commissioner.

Eleventh Circuit Reverses NLRB Order, Enforcing Individualized Arbitration Clause in Employee Agreem

Eleventh Circuit Reverses NLRB Order, Enforcing Individualized Arbitration Clause in Employee Agreem

August 1, 2018

A pizza delivery driver employed by Domino’s Pizza franchisee Cowabunga Inc. filed a collective action under the Fair Labor Standards Act with the National Labor Relations Board.

Court Orders Compliance with Arbitral Subpoenas, Deferring to the Panel’s Assessment of the Value of

Court Orders Compliance with Arbitral Subpoenas, Deferring to the Panel’s Assessment of the Value of

July 31, 2018

In a case that had been filed and then stayed in a New York federal district court in connection with an ongoing arbitration involving alleged violations of federal securities laws, the plaintiffs filed a motion to enforce two subpoenas issued by the arbitrators.

Two Federal Appellate Courts Decline to Find “Evident Partiality” Due to Trivial Omissions in Arbitr

Two Federal Appellate Courts Decline to Find “Evident Partiality” Due to Trivial Omissions in Arbitr

July 30, 2018

In two separate appellate decisions, two circuit courts of appeal declined to overturn orders enforcing arbitration awards where the appellants had challenged the respective awards based on “evident partiality” under the FAA.

U.S. Tax Court Finds Captive Insurer Is Not an “Insurance Company” Under the Internal Revenue Code

U.S. Tax Court Finds Captive Insurer Is Not an “Insurance Company” Under the Internal Revenue Code

July 26, 2018

The U.S. Tax Court held that Reserve failed to qualify as an insurance company for federal income tax purposes under the Internal Revenue Code section 501 (a), (c)(15), which provides for the tax-exempt treatment of income received by insurance companies that meet certain criteria.

California Federal Court Finds Defendant Did Not Wave Right to Arbitrate Despite Delay in Initiating

California Federal Court Finds Defendant Did Not Wave Right to Arbitrate Despite Delay in Initiating

July 25, 2018

Plaintiff argued that Defendant’s basis for removal was not applicable because Defendants waived their right to arbitration or because the case is not related to the agreement containing an arbitration provision.

First Circuit Holds Online Mandatory Arbitration Agreement is Unenforceable

First Circuit Holds Online Mandatory Arbitration Agreement is Unenforceable

July 24, 2018

The First Circuit recently held that an arbitration clause contained in the online contract of the ride sharing app, Uber Technologies, Inc., is unenforceable under Massachusetts law.

New York Federal Court Finds Section 1782 Petition Can Reach Documents Abroad

New York Federal Court Finds Section 1782 Petition Can Reach Documents Abroad

July 23, 2018

In a petition brought under 28 U.S.C § 1782, petitioner sought discovery of documents outside the United States.

THE NAIC Moves to Facilitate the Implementation Of Portions of the Covered Agreement

THE NAIC Moves to Facilitate the Implementation Of Portions of the Covered Agreement

May 1, 2018

The NAIC has started to take steps to facilitate the implementation of the reinsurance collateral provisions of the Covered Agreement entered into by the United States and European Union.

Reinsurance / Follow-the-Fortunes

Reinsurance / Follow-the-Fortunes

April 20, 2018

Court denies reinsurer's post-trial motions, holding that the jury had sufficient evidence to conclude that a reinsurer breached a reinsurance agreement, and that the claims of the reinsured were not barred by a late notice defense.

Limit of Liability Provisions in Facultative Reinsurance Certificates Are Interpreted under New York Law Using the Standard Rules of Contract Interpretation

Limit of Liability Provisions in Facultative Reinsurance Certificates Are Interpreted under New York Law Using the Standard Rules of Contract Interpretation

February 2, 2018

The question sometimes arises as to whether the limit of a reinsurance contract limits the payment by the reinsurer of both indemnity and expenses, or just indemnity payments, with payment for expenses being outside and in addition to the stated limit of the reinsurance contract.

Denial of Reinstatement of Lapsed Life Insurance Policy Affirmed Due to Failure to Satisfy Required Underwriting Standard

Denial of Reinstatement of Lapsed Life Insurance Policy Affirmed Due to Failure to Satisfy Required Underwriting Standard

December 29, 2017

In European Pensions Management Limited v. Columbus Life Insurance Co., a pension benefit plan that had purchased a life insurance policy on the secondary market and then permitted it to lapse for non-payment of premiums sued the insurer Columbus Life, alleging breach of contract and bad faith.

The Uncertainties of Prognostications of the Impact of Hurricanes Harvey and Irma on Catastrophe Bonds and the Reinsurance Market

The Uncertainties of Prognostications of the Impact of Hurricanes Harvey and Irma on Catastrophe Bonds and the Reinsurance Market

September 1, 2017

Much is being written about the extent to which catastrophe bonds (or traditional reinsurance) are "exposed" to or may be called upon to pay losses from Hurricanes Harvey and Irma, and the impact that those storms may have on the ILS market.

NAIC Cybersecurity Working Group Votes to Approve Insurance Data Security Model Law

NAIC Cybersecurity Working Group Votes to Approve Insurance Data Security Model Law

August 13, 2017

Version 6 of the Model incorporates significant changes from the first version released on March 2, 2016, including the narrowed purpose of establishing "standards for data security and standards for the investigation of and notification to the Commissioner of a Cybersecurity Event applicable to Licensees…"

Update on the Status of the Covered Agreement

Update on the Status of the Covered Agreement

August 2, 2017

This article provides guidance with respect to the implementation of the Covered Agreement negotiated and entered into by the Obama Administration with the European Union in January 2017.

McCarran-Ferguson Act. Reverse Preemption Bars RICO Claims Alleging That Reinsurance Transactions by an Annuity Issuer with Affiliates Were a Sham, Resulting in the Material Misrepresentation of its F

McCarran-Ferguson Act. Reverse Preemption Bars RICO Claims Alleging That Reinsurance Transactions by an Annuity Issuer with Affiliates Were a Sham, Resulting in the Material Misrepresentation of its F

June 22, 2017

Plaintiff sued an annuity issuer and other companies, alleging violation of RICO as a result of alleged “sham” reinsurance transactions with affiliates that resulted in a material and serious misstatement of the financial condition of the annuity issuer, and in the value of an annuity purchased from that annuity issuer being less than represented and paid for.

Second Circuit Affirms Dismissal of

Second Circuit Affirms Dismissal of "Shadow Insurance" Lawsuits

April 10, 2017

The suits were two of several class actions that arose in the wake of a 2013 investigation by the New York Department of Financial Services into certain captive reinsurance transactions

The U.S.-EU Covered Agreement: Different Assessments By Different Audiences

The U.S.-EU Covered Agreement: Different Assessments By Different Audiences

February 19, 2017

Also on January 13, 2017, the United States and the European Union released a joint statement announcing the successful negotiations.[4] The statement noted that the Covered Agreement “will ensure ongoing robust insurance consumer protection and provide enhanced regulatory certainty for insurers and reinsurers operating in both the U.S. and the EU.”

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Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.