Question

What does a cut-through clause allow in the event of the reinsured's insolvency?

a.

Direct payment of a loss to the reinsurer

b.

Direct payment of a loss to the original insured by the reinsurer

c.

Direct payment of a loss to the reinsured's agent

d.

Direct payment of a loss to the reinsured's creditors

Posted under IC85 Reinsurance Management

Answer: (b).Direct payment of a loss to the original insured by the reinsurer Explanation:A cut-through clause allows, in the event of the reinsured's insolvency, any part of a loss covered by reinsurance to be paid directly to the original insured by the reinsurer. This bypasses the usual requirement of privity of contract.

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Q. What does a cut-through clause allow in the event of the reinsured's insolvency?
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