The Research Of Original Insured's Direct Claim Against The Reinsurer

In the orthodoxy of reinsurance, since there is no privity between the original insured and the reinsurer, the original insured cannot proceed directly against the reinsurer. However, in the event that a reinsurance contract is made directly for the benefit of the policyholder or the reinsurer agreed to perform the reinsured's insurance contract, the original insured may enforce the term of the reinsurance contract where the covenants of the contractors may change their law status. In practice,there also comes the “hybrid contract” that is neither a co-insurance contract nor a reinsurance contract, which is out of the image of the existing rules of Insurance Law of Peoples' Republic of China(“Insurance Law”). This paper analyzes the current reinsurance market,demonstrates the jurisprudential basis of original insured's direct claim and concludes that there is a need to change the Section 29(2) of Insurance Law.While in the domestic insurance market, medium-sized and small insurance companies run at a heavy loss. When it comes to the business transfer of acquisition and bankruptcy, the law acquiescently tolerates the original insured's direct claim against the successive insurance company,which is referred to as “reinsurer” under the generalized concept of reinsurance. On the other side, the domestic reinsurance market depend on the foreign insurance companies to a large extent, as a result that the original insured would be at a comparative disadvantage especially when the original insurer fall into bankruptcy or refuse to pay. It is quite necessary to affirm the original insured's direct claim against the reinsurer.Actually, the reinsurance contract is different from the liability insurance contract, the original insured could not claim directly against the reinsurer. However, the covenants made between the contractors,which allow the original insured's claim directly against the reinsurer,shall be valid. The validness could be well illustrated by the theory of credit-assignment, contract for the benefit of third party or debt participation.Therefore, the original insured could have the right to claim directly against the reinsurer in accordance with the covenants of the contractors.My proposal is to revise the Section 29(2) of Insurance Law so as to exclude the application of the original rule when it is allowed by the contractors.