A Decade Later: Re-Examining the Presumption of Back-to-Back Cover in English Insurance Law

Abstract

The aim of insurance is to spread risk. Reinsurance is insurance purchased by the insurer to pass on the risk so it can take on additional business. The presumption of back-to-back cover exists between the insurance contract and reinsurance contract where the terms are deemed to be identical so that when the insurer indemnifies the policyholder, the reinsurer would in turn compensate the insurer. The status of the presumption was put in doubt by the United Kingdom House of Lords in 2009 when it found that there was no back-to-back cover when the applicable law for the underlying insurance policy was unknown at the time of the conclusion of the reinsurance contract. The case created uncertainty in the market that still exists a decade later. This Article examines the possibility that the stated reasoning of the House of Lords was incomplete and discusses the possibility that applying different American tort principles of liability allocation in the underlying insurance dispute could have affected the decision of the House of Lords on English insurance Law.

Keywords: insurance law, reinsurance law, back-to-back cover, House of Lords