Follow-the-Fortunes: Reasonableness Is in the Eye of the Beholder (IRMI)

    15 March 2013

    Follow-the-fortunes—or more correctly in this context, follow-the-settlements—is a reinsurance doctrine based on the premise that the reinsurer should not be allowed to second-guess the reinsured's good faith claim decisions. This, it is said, is to prevent the entire system of insurance and reinsurance settlements from breaking down while underlying claim and coverage issues are relitigated at the reinsurance level. Our October 2001 commentary goes into the history of the doctrine, including explaining the distinction between follow-the-fortunes and follow-the-settlements. Our April 2004 commentary updates developments in the doctrine based on its expansion into post-settlement allocations to reinsurers of underlying settlements.

    Reprinted with permission from International Risk Management Institute, Inc.