Subrogation Clause (International Programmes)
The subrogation clause governs the transfer of the policyholder's recovery rights against third parties to the insurer once a claim has been paid, and aligns that right across the master and local policies of an international programme.
- Clause type
- Condition
- Origin/Market
- International programme
- Favours
- Insurer
- Negotiability
- Negotiable
Purpose
Where an insurer pays a loss caused by a third party, the policyholder’s claim for damages against that third party transfers to the insurer by operation of law or contract in many jurisdictions (subrogation). In international programmes, the subrogation clause makes clear that this recovery right applies uniformly across the master and local policies, and sets out how any recovery proceeds are allocated among the entities and insurers involved.
Effect and limits
The transfer of the claim only extends to the amount of indemnity actually paid; any excess loss remains with the policyholder. Intra-group recovery claims against affiliated companies are frequently excluded in international programmes, or waived through a separate waiver of subrogation clause, so as not to burden the group’s economics with internal recovery payments. In addition, local statutory rules may impose their own mandatory subrogation regime that departs from the master policy.
Negotiation and practice
When structuring a programme, it must be decided whether and in what order recovery claims are pursued between the master and local insurer, and how any recovery proceeds reduce the loss borne by the parties involved. The subrogation clause is frequently combined with a waiver of subrogation in favour of group companies, landlords, or contractual counterparties.