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Principles of Reinsurance Contract Law (PRICL) II

Subject Area Private Law
Term from 2015 to 2024
Project identifier Deutsche Forschungsgemeinschaft (DFG) - Project number 267465484
 
Final Report Year 2025

Final Report Abstract

Since October 2015, an international research group consisting of practitioners and academics has been working on the Principles of Reinsurance Contract Law (PRICL). The aim of PRICL is to make reinsurance contract law more transparent and legally secure. Compared to other areas of insurance law, reinsurance law has not been sufficiently researched. Above all, reasons for this are the inaccessibility of the economic sector and the lack of statutory law. This results in a distinct lack of legal transparency, which, in practice, is also often associated with a certain degree of legal uncertainty even for experienced practitioners in the field of reinsurance. In particular, there is no international or supranational reinsurance contract law; national contract laws regularly contain no relevant provisions. Conflicts are, if at all, heard by arbitration tribunals whose judgments are not published – thus there is also a lack of case law to be evaluated. The previous model of a gentlemen's agreement, which is limited to only a few contractual provisions, no longer meets the requirements of the modern reinsurance market. Not least, the intensified supervision resulting from Solvency II has led to increased interest in reinsurance protection that is both legally secure and (economically) valuable (see Section 298 (3) VAG). The PRICL are based on the practical experience of the Project-Advisory Groups (reinsurers, primary insurers and reinsurance brokers) and the Project-Special Advisors, thus reflecting reinsurance practice. The Principles are not legally binding rules created by a legislator. Rather, they are so-called soft law, which the parties to a reinsurance contract can apply by private autonomous agreement (opting in). The PRICL are composed of rules formulated like legal provisions (Articles). In addition, Comments and Illustrations explaining the wording of the rules (Comments) and demonstrating their application with typical examples (Illustrations) are incorporated. Comments and Illustrations are an integral part of the Principles. In the first project phase (PRICL I until 2020), the PRICL group developed principles for broad areas of reinsurance contract law (Principles of Reinsurance Contract Law, PRICL I, available open access). The principles developed in the second and final phase of the project (PRICL II, 2020-2023) cover further areas of reinsurance contract law that are important for reinsurance practice. The final version of the Principles is divided into seven Chapters: General Provisions, Duties, Remedies, Loss Allocation, Loss Aggregation, Coverage and Duration. Thus the Priniples cover the central issues of a reinsurance contract. A comprehensive codification of reinsurance contract law is not intended and not necessary. This is because reinsurance practice – in contrast to contract practice in mass contracts, particularly in the case of consumer participation – does not depend on an en bloc system of dispositive provisions. The PRICL offer significant advantages for parties to international reinsurance contracts: as soft law, they create a practical framework for the application of the law, offer greater legal certainty and are party-neutral. In addition, they are dispositive in nature, so that they can be applied only in part or with modifications. In reinsurance disputes not subject to the PRICL, they can serve as guidelines for courts and arbitral tribunals (as has already happened). The PRICL are supplemented by the PICC (Principles of International Commercial Contracts) of UNIDROIT, which contain rules for general questions of contract law of commercial contracts. With the PRICL and the PICC, the parties can thus comprehensively subject their contractual relationship to transnational law. The research results have already attracted a great deal of attention in both academia and practice. Representative examples include the commentary in the 2024 published vol. 3 of the Munich Commentary on the VVG (edited by Langheid/Wandt), the 6th edition of the English standard work “The Law of Reinsurance”, edited by O'Neill/ Arnold-Dwyer, and the book “Law and Practice of P&C Reinsurance Conract” published in China. The project group has received reports from Germany, Norway and Spain, where the PRICL have already been used as a kind of reference framework in arbitration proceedings on reinsurance law issues. Similarly, a Scandinavian insurance group has begun to incorporate parts of the PRICL into the wordings of its reinsurance contracts, and thus to agree them as binding.

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