Bermuda: Reinsurance Arbitration in Bermuda

Last Updated: 13 January 2006

1. The Bermuda International Conciliation and Arbitration Act 1993 (the "Act")

The way in which arbitration is commenced is usually governed by reference to the reinsurance contract under which a dispute has arisen. However, service of a demand for arbitration and a notice of the appointment of the claimant’s arbitrator is the most common method in which to commence reinsurance arbitrations. In most cases the reinsurance contract will make specific reference as to which country’s law should apply and in which place the arbitration will be held (however see Conflict of Law below at 8). If for example the reinsurance contract said that any dispute should be settled by way of Bermuda arbitration law, reference should be made to the Act. Although Bermuda also has the Arbitration Act 1986, which primarily govern domestic arbitrations the Act is most commonly referred to in international contracts of reinsurance.

2. Method of Appointment of Tribunal

A typical reinsurance agreement will provide for arbitration by a panel of three arbitrators. If the reinsurance agreement is silent as to the appointment of the Tribunal and the parties cannot reach agreement on how to constitute the Tribunal, the Act will apply (provided Bermuda law governs) and the Tribunal would be appointed as follows:

  1. (i) Each party appoints its own arbitrator;
  2. (ii) The two appointed arbitrators choose the third member of the Tribunal.

If the two appointed arbitrators cannot agree the identity of the third arbitrator within 30 days, the third arbitrator can be appointed by an agreed appointing body or, if there is no appointing body, by the Supreme Court of Bermuda. The third arbitrator usually then acts as chairman of the arbitral tribunal.

3. Qualifications of Tribunal

In most reinsurance agreements, arbitration clauses often specify that the arbitrators be active or retired insurance industry persons. The arbitration clause recommended by ARIAS (UK) (which is becoming a very common clause) expands the class of potential arbitrators and suggests the inclusion of lawyers and other professional advisors with a practice in the insurance industry. In complex arbitrations with difficult legal issues, the ideal panel comprises two industry executives appointed by the parties with a senior lawyer with extensive reinsurance experience as the third arbitrator (usually a QC).

4. Independence of Tribunal

The arbitrators, including the party-appointed arbitrators, must be "independent and impartial". However, often parties to arbitration mistakenly believe that their appointee is their advocate or will be biased in their favour. Although this is common practice in the United States, nothing could be further from the truth in Bermuda arbitrations. Simply put, the appointed arbitrators are supposed to be neutral.

Prior to appointment private communication between the parties and a potential arbitrator should be limited to determining that there are no conflicts of interest, confirming the candidates’ qualifications and the potential arbitrator’s willingness to act. In particular there must be no canvassing of the potential arbitrator to determine if he/she would be sympathetic to the appointer. Further there must be no private communication between the parties and the arbitrators once the Tribunal has been constituted.

5. Challenge of Appointment

Under the Act, the appointment of an arbitrator can be challenged on two grounds:

  1. (1) The arbitrator does not possess the qualifications agreed by the parties;
  2. (2) There are justifiable doubts as to the arbitrator’s impartiality or independence.

The Act provides that absent agreement between the parties on the challenge procedure the challenging party must, within 15 days of either becoming aware of the constitution of the Tribunal or becoming aware of any circumstance as referred to above, send a written statement of the reasons for the challenge to the Tribunal. Interestingly, the Tribunal will hear any such challenge - even if the Tribunal consists of a sole arbitrator. In other words the arbitrator who is subject to challenge will essentially decide his/her own fate. If the challenge is rejected, there is a right of appeal to the Supreme Court of Bermuda - but no further right of appeal. During the pendancy of any appeal, the arbitration can continue with the challenged arbitrator in place.

6. Tribunal Jurisdiction

Article 16 (1) of the Act provides that a Tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. Any application for lack of jurisdiction of the Tribunal must be made not later than the submission of defence. The Tribunal then may either determine the matter as a preliminary issue or as part of its substantive award.

There is only one appeal on this subject to the Supreme Court of Bermuda. As with an appeal as to the suitability of an arbitrator, during the pendancy of the appeal, the arbitration can continue. Although such points do not often arise in reinsurance disputes since reinsurance contracts are normally very clear that arbitration applies, it is worth noting that a decision by the Tribunal that the contract is null and void shall not invalidate the arbitration clause.

7. Arbitration Procedure

An arbitration clause can set out procedural rules or it can adopt the rules of an established arbitration institution such as ICC, AAA, ARIAS or the LCIA. In reinsurance contracts, the arbitration procedures tend to be drafted on an ad hoc basis often using Lloyd’s Standard Wording as a template with various additions. It is common practice in ad hoc reinsurance arbitrations for an organisational hearing to be held early in the proceedings and for the Tribunal to rule and give directions on procedural issues that cannot be agreed between the parties.

If Bermuda law applies and the parties have not reached agreement on the procedures to follow, the conduct of Bermuda arbitrations under the Act is governed by Articles 18 to 27. According to Article 19 the Tribunal may in the absence of agreement by the parties, ‘conduct the arbitration in such manner as it considers appropriate’.

8. Conflict of Laws

Conflict of laws issues can arise in reinsurance arbitrations particularly where the contract fails to specify a governing law. As above, the procedural law, or curial law, of all international commercial arbitrations held in Bermuda is governed by the Act unless the parties agree to the contrary. If the parties specify a governing law in their reinsurance contracts, the Tribunal will follow that choice. However, the parties are free to choose a governing law, which need not have any territorial connection with either parties’ residence, place of performance of the contract or the seat of arbitration. The Act does, however, prevent a party from attempting to ‘rewrite’ the parties’ express choice of law agreement by relying upon the conflict of law rules of the jurisdiction chosen by the parties. Only where the parties do not agree on the substantive law governing the dispute will the Tribunal apply the law determined by the conflict of law rules which it considers applicable.

9. Recourse against Tribunal’s Award

The Act allows for recourse to the Court to set aside an award under the following limited circumstances if the party making the application furnishes proof that

  1. (i) A party to the arbitration agreement was incapacitated or the agreement was not valid under the law which was applied;
  2. (ii) It was not aware or given proper notice of the proceedings or was unable to present its case;
  3. (iii) The award deals with a dispute not contemplated or does not fall within the Tribunal’s remit;
  4. (iv) The Tribunal was not composed in accordance with the agreement between the parties;
  5. (v) The application is made within 3 months of receipt of the award.

Further, if the Court finds the subject matter of the dispute is not capable of being dealt with in arbitration or the award is in conflict with public policy it may be set aside.

It is unusual for arbitration awards to be subject to appeal, since the grounds of appeal are very limited and thus most avenues for appeal are moot having been dealt with at an earlier stage in the proceedings. Furthermore, since one of the main benefits of arbitration is its confidential nature, parties are often reluctant to pursue an appeal.

In conclusion, arbitration clauses are a common phenomena in reinsurance contracts and it is not unusual to have the seat of arbitration differ from the law to be followed in the arbitration. For example the seat of arbitration may be Bermuda but the arbitration conducted under the auspices of New York arbitration law. However the Act has been successful since its introduction. The fact that there is limited right to appeal and arbitrators are supposed to be non-partisan should be "appealing" to Bermudian reinsurers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions