7. News From the Working Parties

Reinsurance Working Party, Sofitel Rio, Rio de Janeiro, 2 May 2003 during the VIII Iberio-Latin American Insurance Law Conference
   

1. Attendance

In addition to the following members of the Working Party:- Colin Croly (Chairman) (UK), Michael Gill (Australia), Anthony Kay (Acting as Secretary) (UK), Sergio de Mello (Brazil), Guillermo Lascana Quintana (Argentina), Domingo Lopez Saavedra (Argentina), Peggy Sharon (Israel), Mikael Rosenmejer (Denmark), and Nancy A Vila (Argentina), the meeting was attended by a number of participants at the CILA Conference, making a total of approximately 40 people.

2. Introduction

Colin Croly opened the meeting, referring to this being the latest of the worldwide meetings of the working party, 80 people having attended the last one at the World Congress in New York to hear a mock arbitration based on World Trade Centre related issues. The objective of the Working Party is to compile a comparative study of reinsurance law and so far three reports on What is Reinsurance, Follow the Settlements/Fortunes and the Proper Law of the Reinsurance Contract have been published.

The Reinsurance Working Party in Progress (Chaired by Colin Croly)

3. Progress of Questionnaires

Three further reports are now ready for publication, being no. 4 on Event, no. 5 on Custom and Practice and no. 6 on Cut Through and Transfer Reconstruction issues. On the latter, Colin Croly suggested to Michael Gill that some further enquiry might be appropriate to cover the use and effect of a sudden death clause, as information on this had been volunteered by some countries which may apply to other countries as well.

On no. 7, Intermediaries, Professor Merkin was proposing to delay publication of the final report in view of major imminent changes in the UK.

On no. 8, Limitation Periods, Peggy Sharon reported that so far six reports had been received but none from common law countries and it was agreed that all countries would be asked to respond by the end of October.

There was a lengthy discussion on whether, given the time since publication and changes that had taken place since then that the first report on "What is Reinsurance", an update was required before producing any further reports. In the end it was agreed that the development of financial reinsurance was such that Professor Merkin should be asked to look at this again to consider the extent to which the earlier report may need revision and what new questions would be appropriate to cover the new forms of reinsurance and the whole question of transfer of risk. In this connection, reference was made to the paper of Professor Diaz Bravo (of Mexico).

There was also a discussion of other topics and it was agreed that the subject of insolvency should be looked at. As this is a very wide topic, there was some discussion as to whether it was possible to limit it in some ways which the meeting in the end thought unlikely, as for instance an insolvent company was often involved as both an insurer and reinsurer so that the question of set-off often arose. The Argentinean section volunteered to draft the initial questionnaire for consideration at the next meeting.(Questionnaire no. 9)

4. Publication of Future Reports

Colin Croly reported that, whilst the first reports had been published by LLP, for the future printing had been arranged in-house by Barlow Lyde & Gilbert but that as it was important to recover the costs members were asked to encourage others to buy copies of the reports. It was suggested that members might find it useful to send copies of the reports to clients and in this respect it might be helpful if all the reports published so far could be consolidated together. It was agreed that this should be looked at subject to checking that there were no IP problems arising out of the publication of the first reports.

5. Changes to the Reinsurance Laws in Brazil

Dr Sergio de Mello gave an introduction on his two papers on the Application of the Law and Jurisdiction in Brazil and the Limit and Scope of the Claims Control Clause. He particularly referred to the fact that as reinsurance contracts typically had few clauses which were often implicit, that in considering reinsurance contracts in Brazil general principles would often be applied. On jurisdiction and the law, applicable foreign law is not to be applied if contrary to Brazilian public policy or the constitution. While custom and practice can be looked at, this needs to be done carefully to determine whether it is a real custom as language discrepancies can lead to misconstruction. On claims control clauses Dr Mello said that the general principle behind these was that the reinsured must verify the facts behind the claim and handle this in a businesslike manner in the same way as if it were unreinsured.

6. Report on Mock Arbitration in New York

Colin Croly reported on the mock arbitration held in New York. There had been two panels, a US panel considering the definition of occurrence in a property treaty and an international panel looking at the PA treaty. Both panels decided that the facts constituted one event, although there was a difference on the question of recovery of declaratory judgment costs where this was not specifically covered by the wording which referred only to adjustment costs. The US panel thought these could be recovered and the international not.

7. Any Other Business

Michael Gill referred to the collapse of HIH in Australia and the findings of the Royal Commission which questioned the use of financial reinsurance. He also mentioned that, in view of the finding that officers had known of the financial difficulties for many years, reinsurers have reserved their position.

8. Next Meeting

Colin Croly announced that the next meeting in Brussels during the first week of December would be held in conjunction with a Belgian Colloquium and a meeting of the Presidential Council.

Accumulation of Claims and Subrogation Working Group Rio de Janeiro (Brazil), 2 May 2003 during the VIII Ibero-Latin American Insurance Law Conference
   

The AIDA International Working Group on Accumulation of Claims and Subrogation met on 2nd May 2003, at 11.00 am, in Rio de Janeiro. The meeting was chaired by Dr. Claudio Horst Speyer and assisted by Secretaries: Dr. Enrique José Quintana and Ms. Alicia Susana Murialdo. Over 60 participants were present from various countries including Brazil, Colombia, Mexico, Venezuela, Chile, Portugal, Paraguay and Argentina.

After welcoming all those in attendance, the Chairman of the Party reported briefly on the progress made by the Working Group since the last meeting held during the National Insurance Law Conference in La Plata, Argentina on 14 September 2002. (The theme of the Argentinean Conference was: "Social Security and Individual Insurance Benefits: legal possibilities of accumulation of actions of accumulation").

The Working Party went on to discuss the first item on the agenda: 'The analysis of the Individual Insurance Coverage' which, due to its characteristics can be deemed 'Property Damage Insurance' thus enabling the insured to subrogate against the damaging party, and possible legislative amendments.

The Secretary, Dr. Quintana, reminded the Working Party that in the fifties and the sixties, many Insurance Law teachers tried to find a single concept for the two main insurance branches: property loss and individual insurance. That concept was defined as compensatory, as opposed to the position regarding life insurance coverage. Different national laws stipulated that the insurer's subrogation against the damaging party was not applicable in the case of the individual insurance cover.

In the opinion of the Working Party, this issue deserves further analysis considering that several coverages are currently being structured as an individual insurance (e.g. life insurance policies) which anticipates the provision of benefits to the insured, including payment of medical assistance, medication, hospital or surgical costs.

A further discussion concluded that such new individual insurance coverage should exempt the insurer from subrogating and should then be regulated pursuant to the property damage law. The legislative amendments introduced in Spain, Ecuador and Colombia were taken as interesting and valid examples to be followed.

This subject was actively debated. The delegates agreed on the relevance of the subject, with Mr. Alvarez Ferreira, from Mexico, highlighted that this specific issue was under debate in his country. During the IV National Conference of the Mexican Section held in November 2002 in Guadalajara, Jalisco, Mr. Gabriel Corvera Caraza and Mr. Gerardo Trigueros Gaisman presented a motion entitled "Subrogation in Medical and Accident Insurance". In response to the interest shown, the Mexican delegates agreed to send their motion, a promise that was fulfilled. A brief summary is reported as follows:

The Mexican lawyers agreed on the substantial aspects of this issue. In the case of Medical Expenses Insurance, the cover provided is compensatory just as it is with property damage even though the Mexican law prohibits subrogation in section 152 of the Insurance Contract Act.

In 2001, section 152 was amended to read: "In the case of the individual cover, the insurer shall not be able to subrogate the rights of the insured or its beneficiary against third parties as to the damage caused, except in case of insurance agreements covering medical assistance or health care costs".

This amendment was widely welcomed since, by enabling subrogation, premium costs can be cut, and loss can be reduced by the possibility of recovery and a reduction in connection with the chances of successful recoveries.

Dr. Burmeister, from Venezuela, reported that similar reforms are under consideration in his country. After several opinions in agreement, participants agreed to recommend that the National Sections of those countries where subrogation is not allowed should evaluate the possibility of modifying their domestic legislation in order to foresee this action, taking as a reference the amendment introduced to the Mexican legislation.

Dr. Carlos Huber, from Argentina, then referred to the need to consider subrogation against Hospitals and Health Care Centres. His opinion was followed with great interest and a copy of his presentation was distributed among all participants.

Next, the Brazilian representatives raised the problem posed by the workers' compensation schemes, in the case of "in itinere" events, i.e., accidents which occurred in transit from the worker's domicile to his/her place of work or vice versa and the possibility of subrogating on behalf of the insurer covering the damage. This subject gave rise to a fruitful debate, which included the description of legislative experiences in diverse countries, underlying that, for example, the Argentine legislation stipulated this possibility in the primitive law regulating such accidents.

Before the meeting was closed, and in answer to the interest shown during the discussions and the numerous interventions, the Working Group Chairman requested that the heads of each National Section present appoint one or two members to answer questions from the working group in order to create a database including the countries legislation and case law and publications and would be circulated among the sections, highlighting the increasing financial relevance that the accumulation of claims and subrogation is gaining. This commitment was accepted by all.

The meeting was closed with expressions of general satisfaction for the quality of the discussions and the enriching participation of all delegates.

Dr. Claudio J. Horst Speyer
Chairman

Motor Insurance Working Group: from New York to Rio de Janeiro October 2002 - May 2003

An updated version of the international comparative study on normative and market practice peculiarities relevant to the management of motor third party liability insurance was presented both at the XI World Congress of AIDA held in October 2002 in New York and at the VII AIDA Insurance Colloquium held the following month in Budapest which hosted representatives of many AIDA Chapters, especially those from Central-Eastern Europe who had been unable to attend the New York event. After an additional updating based on the information collected at the 2 May meeting of the Working Group to be held within the frame of the VIII CILA Congress in Rio de Janeiro, the study shall be published and sent to all AIDA Chapters, to control authorities, insurance associations, single insurance companies, as well as to all institutions that contributed to it by supplying information on their respective Countries. Upon request, the study shall be supplied to any other companies and public bodies.

The decision to start working on this study was taken by the Motor Insurance Working Group meeting held in 1990 during the Copenhagen VII AIDA World Congress. Ever since its establishment at the 1978 Madrid Congress the Working Group, under the chairmanship of Prof. Simon Fredericq, realised a series of most rigorous studies on the normative and technical features of motor insurance, with the contributions as far as tenets of the main National Chapters. The study, however, lacked a comparison at international level among the legislative frameworks governing compulsory motor insurance and the management criteria prevailing in the different markets. The subsequent Chairman of the Group, Dr. Raffaele Deidda, accepted this commitment on behalf of the Italian Chapter and appealed to Assicurazioni Generali to secure their cooperation and support. Indeed, already at the time this Company was part of a Group having worldwide establishments, which afforded a practicable way to carry out wide-ranging investigations and to certify the quality of the study's contents. Far from having merely theoretical purposes, by providing a detailed comparison of the various international frameworks, the study was meant as a spur for legislators to enact compulsory motor insurance laws in the Countries still lacking them and everywhere else to improve existing laws by implementing more advanced rules to better protect people, policyholders and damaged parties. Dr. Armando Zimolo of Assicurazioni Generali was appointed to accomplish the work with the support of the Rome Office of the Company.

Even in times of economic globalisation and of transnational travelling, the dramatic numbers in terms of road accident victims and the associated excessive expenditure have not yet awakened a commonly shared worldwide comprehension of the motorisation phenomenon and of the legislative and technical tools apt to prevent risks and guarantee fair compensation for bodily injuries and damages to property. In fact our study highlights the persisting discrepancies among the applicable laws and compensation limits even in the various EU member countries and in various Federated States. Also prevention measures and Highway Code rules are handled without any coordination among countries and, often, within a single country there is no harmonisation between public authorities and private businesses operating in the field, with insurance companies in pole position.

The study started with two questionnaires sent to the 70 AIDA Chapters worldwide, they consisted of a total of 50 questions aimed at achieving a global outlook of normative and market conditions relevant to motor third party liability insurance. A series of economical data on each Country were later added to the study in order to represent each Country's production and wealth rate, the number and the type of circulating vehicles and the development of its road network.

No all AIDA Chapters replied exhaustively. The initial draft studies incorporating the provided date, specially with regard to jurisprudence and law issues, necessarily evidenced a number of dissimilarities in the accuracy, rigor and quantity of details, therefore the Office engaged in the work carried on a selective action of analysis and synthesis, also checking out any missing data with other sources. In the subsequent years contacts were taken with control authorities, insurance associations, companies of the Generali Group, embassies in Italy of the various Countries with a view to furthering the international contents of the survey and, as a matter of fact, also Countries without an AIDA Chapter were involved. At the 1994 IX Sydney Congress the study reported on 114 Countries. The fragmentation of a number of federal states, such as USSR, Yugoslavia, Czechoslovakia, Ethiopia, led to an overhaul of the study in order to take into account the new states that had emerged. At the 10th World Congress in Marrakech in 1998 the comparative study involved 132 countries In that year the chairmanship of the Group, following the premature death of Raffaele Deidda, was taken up by Louis Carrere d'Encausse, who held the post up to the Budapest meeting in 2000, when Armando Zimolo was appointed. Since then the study has been further widened: 166 countries have provided information regarding the adoption of compulsory TPL, while 138 have answered the questions concerning legal aspects and market characteristics. To these countries, the 51 federal states of the USA, the 13 provinces of Canada and the eight Territories of Australia should be added, so that 210 legal systems have been analysed.

It has not been possible to receive information from a few countries in Africa and Asia and from a number of island states in the Caribbean and Pacific, which have little or no impact on world car circulation.

The decision that was taken at the New York Congress was to consider the work as a permanent observatory on the normative and management characteristics of motor TPD in the world by inviting all the AIDA chapters, supervisory authorities, insurers' associations and insurance companies that have taken part in the survey to inform the Office that edits the work about all the changes taking place in their respective countries in the years to come. These changes will be reported on this Bulletin, which is published on a half-yearly basis by the Office on behalf of the Working Group, and inserted in the study itself, which will thus be once again presented in an updated form at the next AIDA World Congress scheduled to take place in Buenos Aires in 2006.

The May 2003 issue of the Motor Insurance Bulletin, published in coincidence with the MIWG meeting at Rio de Janeiro, provides a summary of the basic report, which also contains accounts of the other three studies carried out by the Working Group under the supervision of respectively vice chairmen Dieter Pscheidl and Jan Misana and of the deputy general secretary of Comité Européen de Assurance Jean Louis Marsaud. The works "Trends in compensation of bodily injuries", "The protection of the minors and of the other weaker parties in road accidents", "Fraud in insurance and a means to combat it" currently cover the principal countries in Europe. The Rio congress will thus provide the opportunity to extend their scope and transform into the fully fledged international comparative studies. The questionnaire that has been drafted so as to give a uniformity of answers on the evolution of compensation for bodily injuries is also published in the May 2003 Bulletin. This same method will also be applied for the other two studies so as to gradually increase the volume of information, which will then be discussed in the Group's two annual meetings. The aim is to present at the 12th AIDA World Congress in Buenos Aires international comparative reports on these topics that will be in line with the basic study in terms of breadth.

(Taken from the Motor Insurance Working Group Bulletin, May 2003. To view the whole Bulletin click here)