Definition:Claims agreement
📋 Claims agreement is a contractual provision — most commonly found in reinsurance contracts — that requires the reinsurer to follow the ceding company's claims-handling decisions, including settlements and coverage determinations, provided those decisions fall within the policy terms and are made in good faith. Sometimes called a "claims cooperation clause" in broader usage, the claims agreement specifically concerns the reinsurer's obligation to accept the cedent's claim outcomes without relitigating them, distinguishing it from clauses that merely require the parties to share information.
⚙️ Under a typical claims agreement, the cedent retains full authority to investigate, adjust, and settle claims arising from the underlying policies. The reinsurer agrees to be bound by those outcomes as long as the cedent acts within the scope of the treaty and exercises reasonable judgment. Many agreements include carve-outs for claims exceeding a specified threshold or for extra-contractual obligations, which may require prior consultation. The clause operates alongside the follow-the-fortunes doctrine, reinforcing the principle that reinsurers share in the cedent's actual loss experience rather than second-guessing individual file outcomes.
💡 Without a well-drafted claims agreement, disputes between cedent and reinsurer can multiply, delaying reinsurance recoveries and straining long-term trading relationships. For the cedent, the clause provides operational certainty: claims staff can settle matters without seeking reinsurer approval on every file, preserving the speed and autonomy necessary for effective claims handling. For the reinsurer, the agreement imposes discipline — it must price the treaty recognizing that it cannot cherry-pick which claims to honor. When disputes do arise, arbitration panels frequently look to the claims agreement language to determine whether the cedent met its obligations before evaluating the reinsurer's liability.
Related concepts