1. Fronting and Captives An English Perspective AIDA REINSURANCE WORKING PARTY Michelle George Chadbourne & Parke (London) LLP 11 November 2010

2. 2 What is Fronting? “The use of fronting is an established means of bringing to the London Market overseas risks which could not be insured by London Market insurers directly” Prof. Robert Merkin Insurance Law Monthly October 2008

3. 3 Common Fronting Disputes Back to back, Senhor You mean a blank cheque? I don’t think so… ReinsuredReinsurer

4. 4 Common Fronting Disputes Legality? Governing Law Lost in translation Follow the fortunes v follow the settlements Follow the settlements v claims control/cooperation Conditions precedent Cut through?

5. 5 Claims control clauses Notwithstanding anything contained in the Reinsurance Agreement and/or the Policy Wording to the contrary, it is condition precedent to any liability under this policy that: a) The Reassured shall, upon knowledge of any circumstance which may give rise to a claim against this Policy, advise the Reinsurers thereof immediately and in any event not later than 14 days; b) The Reassured shall furnish the Reinsurers with all information respecting any claim or claims; c) The Reinsurers shall have the right to appoint adjusters and/or representatives acting on their behalf to control all negotiations, adjustments and settlements in connection with such claim or claims.

6. 6 Captives Are captives insurers? Arm’s length or insured’s puppet? How can reinsurer protect itself?

7. 7 Michelle George Partner Chadbourne & Parke (London) LLP MGeorge@chadbourne.com +44 20 7337 8042