REINSURANCE: A contractual provision in U.S. reinsurance agreements in which the parties agree to effect all transactions through an intermediary and the credit risk of the intermediary, as distinct from other risks, is imposed on the reinsurer. Most intermediary clauses shift all credit risk to reinsurers by providing that (1) the ceding company’s payments to the intermediary are deemed payments to the reinsurer, (2) the reinsurer’s payments to the intermediary are not payments to the ceding company until actually received by the ceding company. This clause is mandatory in some states.
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A provision in reinsurance agreements that identifies the intermediary negotiating the agreement. Most intermediary clauses shift all credit risk to reinsurers by providing that 1. the cedant’s payments to the intermediary are deemed payments to the reinsurer and 2. the reinsurer’s payments to the intermediary are not payments to the cedant until actually received by the cedant. This clause is mandatory in some states.
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REINSURANCE: A provision in reinsurance agreements which identifies the specific intermediary or broker involved in negotiating the contract, communicating information, and transmitting funds. The clause should state clearly whether payment to the broker does or does not constitute payment to the other party of the reinsurance contract. Currently a widely used clause provides that payments by the reinsured insurer to the intermediary shall be deemed to constitute payment to the reinsurer(s) and the payments by the reinsurer(s) to the intermediary shall be deemed to constitute payment to the reinsured insurer only to the extent that such payments are actually received by the reinsured insurer.
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UK: Treaty clause that identifies the intermediary who negotiated the agreement. Most clauses shift all credit risk to reinsurers by providing that: (a) the reinsured’s payments to the intermediary are deemed to be payments to the reinsurer; and (b) the reinsurer’s payments to the intermediary are not payments to the reinsured until received by the reinsured.