Question

What is the clause inserted by the reinsurer in the agreement to take part in the settlements of claims?

a.

“The reinsurer shall settle claims within the conditions of the original policies and within the terms of this treaty, or effected by compromise agreement, shall be binding upon the reinsurer.”

b.

“The reinsurer shall settle claims within the conditions of the original policies and within the terms of this treaty, or effected by compromise agreement, shall be binding upon the insurer.”

c.

“The insurer shall settle claims within the conditions of the original policies and within the terms of this treaty, or effected by compromise agreement, shall be binding upon the reinsurer.”

d.

“The insurer shall settle claims within the conditions of the original policies and within the terms of this treaty, or effected by compromise agreement."

Posted under IC85 Reinsurance Management

Answer: (a).“The reinsurer shall settle claims within the conditions of the original policies and within the terms of this treaty, or effected by compromise agreement, shall be binding upon the reinsurer.” Explanation:This clause is inserted by the reinsurer in the agreement to take part in the settlements of claims. It states that the insurer shall settle claims within the conditions of the original policies and within the terms of the treaty. Any compromise agreement made by the insurer shall be binding upon the reinsurer. However, the insurer is responsible for settling or refusing a claim as if it were entirely for its own account and unreinsured. When a claim is likely to exceed the amount specified in the Special Conditions, consultation with the reinsurer must commence immediately.

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