Follow-the-settlements clauses revisited

In autumn 2011, Thailand suffered severe floods. Among the properties damaged were shops and distribution centres owed by a subsidiary of Tesco. Tesco was insured against property damage and BI losses in Thailand under a master global policy issued by ACE European Group and under a local policy issued in Thailand by ACE INA.

The master policy responded on a difference-in-conditions/difference-in-limits basis, which meant that it was only to the extent that the losses fell outside the scope of the local policy that they were covered by the master policy.

ACE was reinsured in the London market as to 55 per cent of its exposure under the master policy and the local policies. Tokio Marine Europe Insurance (TMEI) took a 12.5 per cent line on the reinsurance and in respect thereof placed excess of loss reinsurance with Novae…

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