FOLLOW THE SETTLEMENTS AND FOLLOW THE FORTUNES AIDA

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FOLLOW THE SETTLEMENTS AND FOLLOW THE FORTUNES – AIDA ROME 2014 DANISH, SWEDISH &

FOLLOW THE SETTLEMENTS AND FOLLOW THE FORTUNES – AIDA ROME 2014 DANISH, SWEDISH & NORWEGIAN LAW Niels Schiersing, FCIArb, HORTEN

DANISH, NORWEGIAN & SWEDISH LAW: THE BASIC RULES Reinsurance not governed by the Insurance

DANISH, NORWEGIAN & SWEDISH LAW: THE BASIC RULES Reinsurance not governed by the Insurance Acts in DK, N and S Some principles may apply by analogy (not the provisions which are dimplemented to protect the insured) The permissible extent of construction by analogy is not well defined (to say the least) page 2

DANISH, NORWEGIAN & SWEDISH LAW: CONSTRUCTION OF REINSURANCE CONTRACTS Customs and usages on the

DANISH, NORWEGIAN & SWEDISH LAW: CONSTRUCTION OF REINSURANCE CONTRACTS Customs and usages on the relevant international markets are important when constructing the reinsurance contract: No case law in DK and S but in N: Gjensidige v Continental Insurance and others (unpublished): ”This indicates that a literal construction be applied also under Norwegian law …” ND-1995 -447: ”The insurance policy is developed by brokers at the insurance market in London … Norwegian practice must be considered to comply with English practice in this regard” (Direct insurance) page 3

DANISH, (SWEDISH AND NORWEGIAN) LAW: CONTRACTING Cedant and Reinsurer are free to agree that

DANISH, (SWEDISH AND NORWEGIAN) LAW: CONTRACTING Cedant and Reinsurer are free to agree that the Reinsurer shall be bound by a settlement, an award or a judgment between the Insured and the Cedant ”Follow the Fortunes” clauses (US) ”Follow the Settlements” clauses (UK) page 4

DANISH CASE LAW: BOUND BY CONTRACT? Danish case law: U 1996. 906 SC &

DANISH CASE LAW: BOUND BY CONTRACT? Danish case law: U 1996. 906 SC & U 1999. 429 SC (Co-assurance) Case concerning defective windturbines: The lead could decide and the other insurers obliged to follow (1996) The principle did not apply to payments made to owners of non-insured windturbines (1999) Not Ex Gratia payments … page 5

DANISH CASE LAW: BOUND BY IMPLICATION? U 1912. 239 SC & U 1922. 186

DANISH CASE LAW: BOUND BY IMPLICATION? U 1912. 239 SC & U 1922. 186 AC (Retrocession) By implication, the retrocessionaire obliged to follow the decisions by the reinsurer … The retrocedant was considered to have acted ”prudently and in the interest of all involved insurers/reinsurers must, accordingly, be bound by this decision …” Business Efficacy and Good Faith? Relational Contracts? page 6

DANISH CASE LAW: BOUND BY IMPLICATION? U 2006. 2421 SC (Reinsurance) Cedant: The principle

DANISH CASE LAW: BOUND BY IMPLICATION? U 2006. 2421 SC (Reinsurance) Cedant: The principle of ”Follow the Fortunes” applies Reinsurer: An implied obligation to ”follow the fortunes” apply in treaty reinsurance AC: ”The claimant (cedant) has not established that the respondent (reinsurers) as facultative reinsurers has committed itself to let the cedants decision on the matter of insurance coverage vis-a-vis the insured be binding on (the reinsurer)” SC: Did not opine on the matter E contrario: Business Efficacy and Good Faith in Treaty Reinsurance? Good Faith, Business Efficacy and Relational Contracts … page 7

Horten Advokatpartnerselskab Philip Heymans Allé 7 DK-2900 Hellerup, Copenhagen Tel. 3334 4000 Fax 3334

Horten Advokatpartnerselskab Philip Heymans Allé 7 DK-2900 Hellerup, Copenhagen Tel. 3334 4000 Fax 3334 4001 [email protected] dk