Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

Two courts address discovery-related issues

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Two courts recently addressed discovery issues relating to reinsurance.

  • In Spirco Environmental, Inc. v. American Int’l. Specialty Lines Ins. Co., Case No. 4-1437 (USDC E.D. Mo. Aug. 30, 2006), a coverage action, the Court denied a motion to compel discovery of information about reserve funds and reinsurance, on the basis that they were subject to work product protection and of limited relevance.
  • Sotelo v. Old Republic, Case No. 05-02238 (USDC N.D. Cal. Sept. 13, 2006), involved a claim on a life insurance policy for breach of contract and bad faith. The Court denied a motion to quash a subpoena issued to a reinsurer of the risk, finding that the requested information was discoverable and not privileged.

No global reinsurers rated above AA- by S&P

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Standard & Poors recently lowered its ratings on Swiss Re to AA-. This action is notable not so much because of its potential impact upon Swiss Re, but because it means that there are now no stand-alone reinsurers that have a S&P rating of above AA-. S&P views the reinsurance industry to be volatile and underperforming in terms of earnings.

District Court denies motion to dismiss claims against auditors

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A Court has denied a motion to dismiss claims alleging that KPMG Bermuda had failed to perform adequate audits of Annuity & Life Re (Holdings), Ltd. since the company had failed properly to account for certain retrocessional insurance. Schnall v. Annuity & Life Re, Case No. 02-2133 (D. CT. Aug. 30, 2006). The Court had previously dismissed similar claims asserted against KPMG US, since the audits were performed by KPMG Bermuda.

Arbitration panel not required to give prior arbitration award preclusive effect

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The Connecticut Supreme Court, following one of its own 1999 decisions, has held that an arbitration panel is not required to give preclusive collateral estoppel effect to a prior arbitration award, even where the prior award involved the interpretation of the same provision of a contract between the same parties. LaSalla v. Doctor's Associates, Inc., SC 17483 (Conn. June 13, 2006). The Court held that the desire to maintain the flexibility of the arbitral process was more important than the desire to promote the stability and finality of judgments in this context, noting in dicta that a specific provision in the contract to the contrary might have led to a different result.

Legislation potentially affecting reinsurers proceeds in US and UK

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The implementation of legislation regulating the reinsurance industry is proceeding in the UK, while federal regulatory legislation is under consideration in the US Congress. In the UK, the Financial Services Authority has issued a consultation paper titled Implementing the Reinsurance Directive, which describes the European Union's Reinsurance Directive and the FSA's implementation initiatives. The Reinsurance Directive is intended to create a single European market in reinsurance and remove remaining barriers to trade within the EU arising from varied supervisory regimes.

In the US, the Nonadmitted and Reinsurance Reform Act of 2006 is pending in the House. This bill, if enacted, would pre-empt state laws and attempt to create uniformity in the regulation of reinsurance, and would grant a reinsurer's domiciliary regulator the sole responsibility for regulating the financial solvency of the reinsurer if such state is an NAIC accredited state.