DEFINITION of 'Act-As-One Provision'

A reinsurance contract provision that requires reinsurers that are party to a single contract to work together to choose a single arbitrator in the case of a dispute. An act-as-one provision is used when multiple reinsurance companies are involved in the same dispute, and prevents a situation in which multiple arbitration panels are being used to represent different reinsurers.

BREAKING DOWN 'Act-As-One Provision'

Act-as-one provisions streamline the settling of disputes by treating all reinsurers associated with the dispute as one, rather than involving many different arbitration panels in the proceedings. By forcing the reinsurers to work together, the process bypasses confusion. The dispute is thus between the reinsured and a group of reinsurers that are all treated as if they were part of a single reinsurance company.

A third arbitrator may work with the reinsured’s arbitrator and the reinsurers’ arbitrator as a sort of umpire. The arbiters selected by the reinsurers and the reinsured choose the umpire.

Insurance companies and the reinsurers that they go into contract with may go to arbitration to settle disputes they have about coverage. For example, the insurance company may work with multiple reinsurers under a single treaty to provide reinsurance coverage on some of its insurance contracts. If the insurer submits a claim to the reinsurers that is denied, it may take the issue to arbitration. The treaty and its act-as-one provision would treat all the reinsurance companies as one, and the reinsurers would choose a single arbitration panel to represent their interests.

If one of the reinsurers does not want to participate in arbitration proceedings, and thus opts out, it may be compelled to do so on procedural grounds.

An act-as-one provision does not change the liabilities owed by each of the reinsurance companies. This means that a reinsurance contract with several liability does not change to joint liability just because the reinsurance companies are required to choose a single arbitrator. 

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