Claims Cooperation Clause
The claims cooperation clause obliges the cedent to notify the reinsurer of losses and involve it in claims handling, in some versions up to a consent requirement for settlements.
- Clause type
- Condition
- Origin/Market
- Reinsurance market
- Favours
- Insurer
- Negotiability
- Negotiable
Purpose
The claims cooperation clause obliges the cedent to notify the reinsurer of losses and involve it in claims handling. The milder cooperation form requires notification and consultation; the stricter claims control clause transfers the conduct of claims handling to the reinsurer. Cooperation clauses are common above all in facultative covers and where cession rates are high.
Effect and limits
The clause is in tension with the follow-the-fortunes principle: the more the reinsurer co-decides, the less it should later have to rely on the cedent’s settlement decisions. If the cedent breaches the clause, benefits may be reduced or refused – in some jurisdictions even without proof of prejudice to the reinsurer.
Negotiation and practice
Notification periods, thresholds and consent requirements should be embedded operationally in the cedent’s claims processes so that, in a major loss, cover is not jeopardised by formal errors. The key negotiation point is whether the clause is drafted as a duty to consult (cooperation) or as a consent requirement (control).