Til Death Do Us Part: Issues Troubling the Long-Term Partnerships Between Life Insurers and Their Reinsurers
Unlike the frequently short term nature of Property/Casualty reinsurance agreements, most life reinsurance treaties last literally for life – until the last reinsured whole life policyholder dies. The typical lifespan of such treaties requires the quarterly administration of premiums and claims from anywhere between 25 and 50 years. Given this long term relationship, historically life insurers and reinsurers have worked together over the course of decades to resolve potential disagreements amicably, with give and take and both sides and in the spirit of utmost good faith. Formal life reinsurance arbitrations were thus extremely rare, and until recent years most participants in the industry could count on one hand the arbitrations they had been involved with over the prior quarter century.
In recent years, however, a spate of troubling issues have plagued the industry, leading reinsurers and cedents to resort to arbitration with greater frequency. Given their prior lack of reinsurance disputes, however, life reinsurers and insurers have often lacked experience with the dispute process. Likewise, because of the technical and actuarially driven nature of life reinsurance treaties, the most qualified arbitrators are often actuaries, who generally lack first-hand knowledge of standard arbitration procedures. Industry consolidation has exacerbated this problem by creating more conflicts, with major direct writers usually doing business with virtually all of major life reinsurers. These factors have left the industry with a shortage of experienced arbitrators with the requisite business and technical backgrounds at a time when they are needed more than ever.
Most life reinsurance treaties require that arbitrators must have served as officers of life insurance or reinsurance companies to qualify as arbitrators. Those arbitrators that meet that qualification would be well served to become more educated not only in the arbitral process, but with respect to some of the troubling issues causing friction in the long marriages between life insurers and their reinsurers.
- Opportunities for arbitrators to become educated regarding issues causing reinsurance disputes and for which qualified arbitrators are needed.
- Opportunities for life insurers and reinsurers who may lack experience with life reinsurance arbitrations to learn more about how lawyers and arbitrators are addressing some of the issues they are facing.
- Opportunities for counsel to gain insights into the nature of disputes that likely will continue to trouble life insurer and life reinsurers.
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