In a precedent-setting case, Russian courts (including the
Russian Federation Supreme Arbitrazh Court) ordered Infrassure, a
Swiss reinsurer, to pay US$34.4 million to its reinsured, a Russian
subsidiary of Allianz (formerly ROSNO).
In December 2008, ROSNO and RusHydro (the original insured)
executed an insurance contract that required ROSNO to reinsure its
risks. The contract was governed by Russian law. ROSNO obtained
reinsurance from a pool of reinsurers that included Infrassure
providing 17.2 percent of the original coverage. Under the relevant
reinsurance slip, the term of reinsurance was from January 1
through December 31, 2009.
As a result of an accident at RusHydro's Sayano-Shushenskaya
Electric Power Plant on August 17, 2009, three hydroelectric
generators were destroyed and the remaining seven hydroelectric
generators were damaged. ROSNO, which insured the equipment for up
to US$200 million, recognized the incident as an insurable event in
February 2010 and paid out the full amount of loss between February
and July 2010.
Later in 2010, all reinsurers paid their share in the
reinsurance coverage to ROSNO except for Infrassure. Infrassure
paid only US$11.4 million in December 2010 and rejected ROSNO's
claim for the remaining US$23 million.
When ROSNO sued Infrassure in court, the latter denied its
obligation to pay the reinsurance claim and made a counterclaim
seeking reimbursement of the previously paid US$11.4 million.
Infrassure argued that under the reinsurance slip, the insured risk
was defined as payment by ROSNO under the original insurance to
RusHydro, which was made in 2010 beyond the expiry of the
Russian trial and appellate courts ruled in favor of ROSNO,
having concluded that the acceptance by Infrassure of all risks and
liability terms, "as defined in the original insurance
policy" in the reinsurance slip, amounted to incorporating the
terms of the underlying insurance contract by reference. Since the
insured event was acknowledged and insurance coverage paid by ROSNO
in compliance with the terms of the underlying insurance contract,
Infrassure had no grounds to claim that ROSNO's payment beyond
the reinsurance term released Infrassure from payment to ROSNO of
its full share of reinsurance coverage.
Earlier in 2013, Allianz applied to the Federal Supreme Court of
Switzerland seeking enforcement of the Russian court order against
Infrassure. Infrassure challenged Allianz's enforcement
application, alleging inter alia bribery in the context of
Russian court proceedings.
A decision of the Federal Supreme Court of Switzerland to
enforce the Russian court's decision would set out an important
precedent. In the absence of a bilateral legal assistance treaty
between Russia and Switzerland, such a precedent would potentially
"open the gates" for enforcement of Russian court
decisions in Switzerland, and likewise the Swiss court decisions
could potentially be enforced in Russia on the basis of
reciprocity. Switzerland's position as one of the most
significant global centers for insurance and reinsurance would
amplify the impact of decisions. From a policyholder's
perspective, if your coverage is in any way dependant on your
insurer's ability to collect on its reinsurance, these are
clearly developments to watch.
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