Beacon Insurance Group provides property coverage for a regional distribution center owned by Sterling Logistics. Because the center's replacement value exceeds Beacon's standard retention limits, Beacon negotiates a specific, individual arrangement with Odyssey Re to assume 75% of the exposure exclusively for this particular property. Following a severe structural fire, Sterling Logistics submits a valid claim for $4,000,000. Based on standard reinsurance principles, how must this claim be settled with the insured?
- Beacon Insurance Group must pay the full $4,000,000 to Sterling Logistics, and then recover the reinsured portion from Odyssey Re.Cevap
- BOdyssey Re is legally obligated to pay 1,000,000.
- CSterling Logistics is required to divide their claim, filing for 3,000,000 with Odyssey Re.
- DBeacon Insurance Group achieved risk avoidance by transferring the exposure, leaving Odyssey Re solely responsible for the $4,000,000 settlement.
Cevap
Beacon Insurance Group must pay the full $4,000,000 to Sterling Logistics, and then recover the reinsured portion from Odyssey Re.
Reinsurance is a contract of indemnity strictly between the primary insurer (ceding company) and the reinsurer. Because there is no privity of contract between the original policyholder and the reinsurer, the primary insurer remains fully liable to the policyholder for the entire claim amount. The primary insurer must settle the claim first and subsequently seek reimbursement from the reinsurer according to their specific agreement.
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Anahtar Kavram
Privity of Contract in Reinsurance