HFW
14 Experts
6 Contributions by HFW Experts
PRACTICE NOTES
Export credit agency (ECA) backed financing has long served as a dependable funding route for the shipping and offshore sectors, yet the financial crisis expanded the influence of ECAs across all areas, from cruise vessels to drilling units and liquefied natural gas (LNG) carriers. Banks commonly welcome ECA participation as it enables them to manage capital pressures in a capital‑intensive industry and to address risks tied to exporting to overseas purchasers. ECAs provide, among other measures, direct lending, insurance and guarantees to facilitate ship finance transactions and to safeguard the interests of domestic shipyards selling worldwide. The financing structure and documentation will differ depending on the particular form of support delivered by the ECA.
What are Export Credit Agencies?
An ECA is typically a governmental body or a quasi‑governmental agency, but it can also be a publicly or privately owned company (acting on behalf of the
Banking & Finance
PRACTICE NOTES
This Practice Note offers a primer on the reinsurance market—what it is, how it operates, and the core ideas that underpin it.
What is reinsurance?
Reinsurance is cover for insurers. It is an insurance contract bought by an insurer—often via a specialist reinsurance broker—to protect that insurer’s liabilities. In practice, the reinsurance agreement can sometimes be set up before the underlying insurance contract to which it relates. Reinsurance can address a wide range of risks—life, property, third-party liabilities and cyber—in much the same way as insurance.
Purpose of reinsurance
The reinsurance sector is a vital global business and the backbone of the insurance market. It serves several key purposes, including:
enabling insurers to spread the financial risk assumed when writing policies, reducing volatility and smoothing loss experience, and protecting against major catastrophes and events (such as hurricanes, wildfires and
Insurance & Reinsurance
PRACTICE NOTES
Loss settlement clauses
Reinsurance agreements can be set up on a proportional or a non‑proportional basis, and loss settlement clauses appear across both structures. Their core role is to capture the parties’ consensus on how the reinsured can evidence its loss when seeking to recover under the reinsurance. It documents the evidential route and threshold to be followed in presenting any reinsurance claim, where applicable by the reinsured party. Where the reinsurer has adequate confidence in its cedant’s handling of inwards claims, the usual aim is to ease the reinsured’s evidential burden that would otherwise arise at common law, and to reduce the need for reinsurers to re‑examine the underlying claims. Certain loss settlement provisions also include express safeguards or provisos to prevent the reinsurer’s bargain being defeated by binding settlements that fall outside the granted cover. Wording dealing with loss
Insurance & Reinsurance
PRACTICE NOTES
The Practice Note titled UK financial and trade sanctions for insurers sets out which sanctions affect insurers, what those measures involve, how the Financial Conduct Authority oversees compliance, and the screening and due diligence insurers should implement. It delves further into policy wording—especially how sanctions interact with insurance contracts and the purpose of sanctions clauses.
Lloyd's Market Association Sanctions Clauses
The Note concentrates on the market-standard formulations: the Lloyd’s Market Association (LMA) 3100A clause (LMA 3100A) and the LMA 3200 clause (LMA 3200). These were issued in October 2023 following an LMA consultation on the LMA 3100 clause first published in 2010. LMA 3100A keeps the LMA 3100 wording, but its title removes the words ‘and exclusion’ to indicate the clause pauses, rather than removes, cover. Under LMA 3100A, the Sanctions Limitation Clause provides that no (re)insurer is taken to provide cover, nor be liable to pay any
Insurance & Reinsurance
PRACTICE NOTES
Purpose of the TP(RAI)A 2010
The Third Parties (Rights Against Insurers) Act 2010 (TP(RAI)A 2010) revoked and superseded the Third Parties (Rights Against Insurers) Act 1930 (TP(RAI)A 1930). The aim of the 1930 Act was to make sure that, where an insured person had incurred an insured liability to a third party and later became insolvent, the insurance proceeds were paid to that third party rather than forming part of the insolvent estate to be divided amongst all creditors of the insured. In much the same vein as the earlier regime, TP(RAI)A 2010 assigns to the third party certain of the insolvent insured’s rights under the policy and permits the third party to issue proceedings straight against the insurer. The principal development under TP(RAI)A 2010 is that a third party may now sue the insurer directly or obtain early information about the
Restructuring & Insolvency
PRACTICE NOTES
Insurers must negotiate a patchwork system of financial and trade sanctions.
Within the UK, HM Treasury leads on the financial sanctions regime, operating via the Office of Financial Sanctions Implementation (OFSI). Trade sanctions sit with the Department for Business and Trade, delivered through the Export Control Joint Unit (overseeing the UK’s export control system) and the Office of Trade Sanctions Implementation (OTSI), which handles civil enforcement of most trade sanctions linked to the movement of goods involving UK firms that do not cross the UK border). The Department for Transport manages shipping-related measures, while the Foreign, Commonwealth and Development Office sets the UK’s overarching sanctions policy. UK trade and financial sanctions reflect United Nations Security Council decisions, alongside unilateral UK listings and measures with equivalent effect to financial sanctions, including those made under the Anti-terrorism, Crime and Security Act 2001. The
Insurance & Reinsurance
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