Introduction:

In view of the international character and specific nature of the reinsurance, some disputes may occur between the parties involved in a reinsurance contract. Such disputes may sometimes lead to litigation, which  is, in most cases,  time consuming, costly for all involved parties and most importantly would likely jeopardize the relationship of the disputing parties, affecting also their reputation in the global insurance and reinsurance market.

In order to avoid resorting to litigation, alternative dispute resolution mechanisms such as arbitration, mediation, conciliation, etc. constitute viable and most of the times more efficient ways to resolve such disputes.

Alternative Dispute Resolution are being increasingly popular in reinsurance disputes because they propose faster, more efficient, more tailored, more flexible, less costly, more confidential dispute resolution methods.

The aim of this article is to summarize  the different forms of Alternative Dispute Resolution available to the parties involved in a reinsurance contract.

  1. The different forms of Alternative Dispute Resolutions:

A. Negotiation for amicable settlement: First stage in attempting to resolve disputes. Negotiation may be included in advance in the reinsurance contract through a clause providing that the “parties enters into “good faith” negotiation prior to refer any dispute to arbitration or litigation.”

Usually the parties agree to a specific period of time within which they intend to reach a fair solution, enabling them to end up their dispute, without resorting to arbitration or litigation.

The negotiation process may be suitable for parties, who wish to maintain the control of their discussions without the intervention of any third party.

B. Early neutral evaluation: In case, the legal action appears to be the most suitable option to resolve their dispute, the parties may ask on a confidential basis to an independent third party to review the legal, and factual parts of the dispute, with the aiming of focusing primarily on the necessary documentation, which will be presented to the court.

C. Non-binding arbitration: Based on the documentation and evidences presented by the parties, an appointed and impartial arbitrator may recommend a solution to the dispute, which does not bind the parties, who may later on, decide to implement the said recommendations or not.

D. Mediation:  The aim of the mediator, as an independent and impartial third party, is to facilitate the discussions between the parties, which at any time of the mediation process may decide to reject any further participation of the mediator, as the latter has no authority to impose any recommendation and/or to bind the parties.

The process of mediation may be voluntary, ordered by the court, or derived from the reinsurance contract.

E. Conciliation: The main role of the conciliator is to take an active role in the negotiations, and to make recommendations, as to what can be the most suitable and fair solution to resolve the dispute in an amicable manner between the parties.

The process of conciliation may be voluntary, ordered by the court, or derived from the reinsurance contract.

F. Mini-trial: The mini trial process consists for the involved parties to present their legal cases to a panel of senior executives (one for each party), and to a neutral chairman.

The said panel rendering a non-binding decision, which can be used by the parties as a basis to resolve their dispute.

G. Expert opinion: It may be judicious for the parties to instruct an independent expert (loss adjuster, lawyer and others), in order to obtain a non-binding opinion and expertise on a particular aspect of the dispute, which may serve as the basis of an amicable settlement between the parties.

H. Arbitration: The involved parties agree to resolve their dispute through arbitration which is in general agreed in advance by parties in the form of an arbitration clause present in the reinsurance contract.

The said arbitration clause jointly with the reinsurance contract usually detail how a dispute is to be referred to arbitration, as to the number of arbitrators, place, and rules/law governing the arbitration process.

The decision rendered by the arbitrator(s) is binding in the sense that in general the parties agree prior to the start of the arbitration process to accept the final decision rendered by the arbitrator(s).

Conclusion:

Several forms of Alternative Dispute Resolutions are available to the parties involved in a reinsurance contract, enabling them to avoid in an efficient way, lengthy, long and costly legal proceedings.

Furthermore, the said forms of Alternative modes of Dispute Resolutions have the advantage of maximizing the chances for the parties to maintain a good relationship, and to protect their reputation in the global insurance/reinsurance market, as being performed on a confidential basis.

Authors:

Robert Habchi (Nasco Reinsurance Brokers) /Alaa Zeineddine (EMEA Legal Counsels)

Sources:

Robert Merkin, A guide to Reinsurance, Informa Law, 2007, 496 pages Mary Kay Viskkocyl, Barry R.Ostrager, Modern reinsurance and practice, LegalWorks, 2017, 750 pages