Errors and Omissions Clause (Reinsurance)
The errors and omissions clause (reinsurance) ensures that unintentional mistakes or omissions in ceding, reporting or administering a risk do not automatically void cover, provided they are corrected promptly on discovery.
- Clause type
- Condition
- Origin/Market
- Reinsurance market
- Favours
- Insured
- Negotiability
- Market standard
Purpose
Cessions are often processed in high volumes and under time pressure – a risk is reported late, a limit is transposed incorrectly, or a policy amendment is not communicated in time. The errors and omissions clause protects against the consequence that a purely administrative mistake results in the complete loss of reinsurance cover, provided there is no intent or gross negligence.
Effect and limits
The clause requires the cedent to correct the error promptly once discovered; in return, cover continues as if the error had not occurred. It does not replace proper contract administration and does not cover systematic or deliberate breaches of reporting and cession duties. Its scope is usually limited to clerical and administrative errors, not to substantive misjudgements of the risk itself.
Negotiation and practice
Key negotiation points are the definition of “promptly” and whether the clause also covers premium calculation errors or only reporting and administrative mistakes. In high-volume automated cession processes, the clause is a practically significant buffer against systemic errors.