Financial transaction involving the simultaneous purchase and sale of identical or equivalent financial instruments in different markets in order to profit from price differences. Per-transaction profit is small but financial institutions such as banks and (re)insurers enter into large transactions at relatively low costs.
Insurance Encyclopedia
Arbitration
Proceeding for settling a dispute in which disputes are given to a third party or panel of experts to hear two sides of the story and who has power to make a legal binding decision for both parties on the case.
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US: Arbitration: A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to responsibility for or extent of a loss.
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UK: An alternative to going to court for the settlement of a dispute. An independent arbitrator hears the case and makes an award in accordance with the Arbitration Act 1996. See ALTERNATIVE DISPUTE RESOLUTION.
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An alternative to litigation by submitting a dispute to the judgment of a specified number of disinterested persons called “arbitrators,” whose decision called an “award” is binding on the parties. (I)Form of Alternative Dispute Resolution (II) Alternative to court room litigation (III) Parties submit their disputes to a NEUTRAL third party called the Arbitrator (s) or Arbiter (s) for resolution (IV) Binding dispute resolution, equivalent to litigation in the courts.
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UK: an alternative to litigation for the settlement of insurance disputes; contracts often specify the place of arbitration in the event of a dispute.
Arbitration Clause
Language providing a means of resolving differences between the reinsurer and the reinsured without litigation. Usually, each party appoints and arbiter. The two thus appointed select a third arbiter, or umpire, and a majority decision of the three becomes binding on the parties to the arbitration proceedings.
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UK: A policy condition that commits the insured and the insurer to use arbitration as a means of settling disputes as to the amount of a claim liability otherwise being admitted. The clause does not appear in liability policies.
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A provision found in reinsurance contracts whereby the parties agree to submit their disputes to a non-judicial adjudication panel rather than a court of law, generally subject to selection criteria and procedures set out in the clause. The arbitration panel produces an award, ultimately enforceable by a court of law, binding both parties.
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The clause in an insurance policy that spells out how disagreements over a claim are settled. Generally, each party chooses an arbiter the arbiters agree on an umpire and these three agree on a resolution of the dispute. Under some clauses, an unsatisfied party may have the option to seek judicial relief following an arbitration finding.
Arbitration clause (Property Insurance)
A clause stating that in case of a disagreement regarding the amount of a claim, each party (the insured and the insurer) will appoint an appraiser, who will then select an mediator. An amount will then be determined by at least two of these three, and this settlement will be binding.