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Reinsurance: cut-through clauses

Insurance Law Monthly

Reinsurance: cut-through clauses

Cut-through clauses have been used in reinsurance contracts for many years. Their effect is to give the assured a direct claim against reinsurers. Traditionally the clauses have been confined to the situation where the reinsured had become insolvent, and there are unresolved issues as to whether the clause can be enforced as against the reinsured’s liquidator in that it favours the assured as an unsecured creditor.

The clause in Randgold Resources Ltd v Santam Ltd and Another [2018] EWHC 2493 (Comm) operated independently of insolvency. The question before Christopher Hancock QC (sitting as a Deputy High Court Judge) was whether the assured was entitled to seek a declaration as to the liability of the reinsurers to the reinsured.

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