The claims falling under excess of loss reinsurance contracts following the exceptional losses suffered in both Queensland and Victoria, Australia, need reviewing. Peter Smith poses and presents solutions to some contract wording questions.
The concept of a catastrophe excess-of-loss reinsurance should be a simple one. It usually covers losses occurring during the period of the contract on policies specified and covered by the scope of the reinsurance arising from a form of words similar to “any one occurrence and/or series of occurrences arising from any one event and/or catastrophe”.
But while it should be simple, reinsureds will note that reinsurers have often drafted (and used) clauses that have proved to be precisely the opposite.
The first of these clauses limits the duration of any one catastrophe (generally in the case of flood perils) to losses occurring within a 168-hour period. The reinsured may choose its inception date provided that it is not before the first recorded loss date and also provided that no two periods overlap.
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Flooding, Australia, Peak perils, GKA Associates, Claims