How reinsurance arbitration works: panels, umpires and enforcement

The short version

• Most reinsurance disputes, treaties above all, go to arbitration rather than court, usually in an ad hoc process the parties and panel run with no administering institution.
• The panel is three industry people: each side names one arbitrator, and those two choose a neutral umpire, a tie-breaking third.
• The panel reads the contract as an honourable engagement, so it is not bound by the strict rules of law or evidence and applies the custom and practice of the industry.
• A panel can order pre-hearing security, such as a letter of credit, and a US court will confirm the order where the panel had the power to make it.
• US and London practice differ: US party arbitrators may advise the side that appointed them and awards are usually unreasoned; London panels are all neutral, give reasons, and the loser usually pays.
• For cross-border reinsurance a state law voiding insurance arbitration no longer defeats the clause under the New York Convention: the Fourth, Fifth and Ninth Circuits enforce it, and in 2025 the Second Circuit joined them; this is the position as of 30 October 2026.^{1,2,6,10,11,12,13}

What is reinsurance arbitration, and why do treaties arbitrate?

Reinsurance arbitration is how insurers and reinsurers resolve disputes under a reinsurance contract. Reinsurance is insurance an insurer buys: a ceding company (the cedent) passes part of its risk to a reinsurer under a treaty (a standing contract covering a book of business) or, less often, a facultative certificate (cover for one risk). Most treaties send almost any dispute to a private panel of industry arbitrators, not a court, and the process is usually ad hoc: the parties and panel run it themselves, with no administering body unless they pick one.^1,2

Reinsurance contracts have named arbitration for over a century, and most treaty disputes are arbitrated. The ARIAS.U.S. guide’s illustrative clause, a sample reinsurance arbitration clause, sends any dispute or claim arising out of or relating to the agreement, including its formation and validity, to the panel, so even an argument that the contract is void goes to arbitration. The wider picture of who decides insurance disputes is in insurance arbitration.^1,2

Parties arbitrate for industry expertise, privacy, flexibility and a final result courts rarely disturb. By the market’s own account that has a cost. What began as a private way for two companies to settle a disagreement between themselves has, since the 1990s, turned formal and court-like, and may be no cheaper or faster. Institutions exist for parties who want them: ARIAS.U.S. publishes rules, certifies arbitrators and umpires against set qualification standards and publishes rules for the use of AI tools in its arbitrations, and AAA-ICDR has reinsurance supplementary procedures and a roster. Where the rules keep the decision with a person while AI only helps, see AI in arbitration and AI in dispute resolution.^1,3,5

How is the panel formed and the umpire chosen?

Each party appoints one arbitrator and those two appoint a neutral umpire, a three-person panel of present or former insurance or reinsurance executives, or ARIAS.U.S.-certified arbitrators. If the two cannot agree on an umpire, a default procedure in the clause, or a court, breaks the deadlock.^1,2

The ARIAS.U.S. illustrative clause sets a thirty-day deadline for each step: miss the deadline to name your arbitrator and the other side may appoint both, and if the two arbitrators do not choose an umpire in thirty days the parties appoint one under the ARIAS.U.S. Umpire Selection Procedure. The clause also fixes who may serve: no panel member may be under a party’s control or have a financial interest in the outcome.²

Older clauses broke a deadlock by lot, each side striking names from a list. Because the umpire may decide the case, ARIAS.U.S. offers a procedure built to produce a neutral one. It runs in two stages: the parties first draw candidates at random from the ARIAS umpire or certified-arbitrator lists, then put written questions to them and rank them. Drawing at random stops either side loading the list; the ranking leaves the choice with the parties.²

The AAA route works the same way on a roster: the AAA sends the parties a list of no more than 12 umpires from its National Roster of Insurance and Reinsurance Arbitrators, and if they cannot agree each side strikes no more than four names and ranks the rest, with the AAA inviting the highest mutually ranked candidate. The panel is three arbitrators unless the contract says otherwise, and a party-appointed arbitrator may consult its appointer about the umpire. New York is a common seat; how arbitration runs there is in arbitration in New York.⁵

Can a party’s own arbitrator take its side?

In US practice a party-appointed arbitrator may start out predisposed toward the side that named it but must stay open-minded and decide on the merits. Every panel member must be financially disinterested and not under a party’s control, and the umpire must be neutral. The guide treats a financial interest as, for example, a fee tied to the result, and control as being a party’s officer, director or employee.²

Until a cut-off the panel sets at the first meeting, a party may talk privately with the arbitrator it chose, a practice the industry calls ex parte contact, to test the strong and weak points of its case. After that date no one approaches the panel on one side, and arbitrators keep their deliberations to themselves. Where the contract or the parties want an all-neutral panel, ARIAS.U.S. and the AAA both offer a neutral-panel option under which the party-appointed arbitrators are also neutral, so no panel member may have one-sided ex parte contact with a party.^1,2,5

What is an honourable engagement clause?

An honourable engagement clause tells the panel to read the contract as an honourable engagement, not a strict legal obligation: it is not bound by the strict rules of law or evidence and decides by the industry’s custom and practice. In the ARIAS.U.S. illustrative clause the arbitrators and umpire “shall interpret this agreement as an honorable engagement, and shall not be obligated to follow the strict rules of law or evidence,” and “shall apply the custom and practice of the insurance and reinsurance industry.”²

Courts read such clauses broadly. In Banco de Seguros del Estado v. Mutual Marine Office, Inc. the treaty said the arbitrators “shall consider this Treaty an honourable engagement rather than merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law,” and courts have read such clauses generously, giving arbitrators wide discretion over remedies. The contrast with a reasoned, law-bound London award is in arbitration in London.⁶

How is a reinsurance arbitration run, from demand to award?

The claimant starts with a written demand that identifies the contract and claims and names its arbitrator; the respondent answers, names its arbitrator and states any counterclaims. The panel then holds an organisational meeting that sets the schedule, the scope of discovery, the ex parte cut-off and confidentiality, and makes its disclosures on the record.²

Discovery runs on a scheduling order with wide panel discretion, and under the Federal Arbitration Act the panel can subpoena witnesses and documents. After document and deposition discovery, pre-hearing briefs and a hearing at which witnesses are examined, the panel deliberates and issues a written award, which a majority can decide and which binds the parties. In US custom the award is short and gives no reasons, sometimes only a line or two, unless the clause requires reasons or both parties ask for them; reasons give a court more to review.^1,2

Smaller disputes can run on a lighter track: one jointly appointed arbitrator, an organisational meeting by phone, little or no discovery, and a short hearing or none. ARIAS.U.S. and the AAA both publish expedited procedures for this, and for small claims ARIAS.U.S. has its Streamlined Rules. Where more than one reinsurer is in the same dispute, a consolidation clause lets the cedent run one arbitration rather than many.^1,2,5

Can the panel order pre-hearing security?

Yes. A reinsurance panel can order a party to post pre-hearing security, also called interim security, often an irrevocable letter of credit but also a bond or escrow, so a final award is not left uncollectable, and a US court will confirm such an order where the panel had the power to make it.^2,6

In Banco de Seguros del Estado v. Mutual Marine Office, Inc. (2d Cir. 2003) the panels in two reinsurance arbitrations ordered the reinsurer to post irrevocable letters of credit, for $708,714.04 and $278,238.96, as pre-hearing security; the district courts confirmed the interim orders and the Second Circuit affirmed, reading the broad honourable-engagement clause to give panels discretion to order security that protects the final award. The court asks “whether the arbitrators had the power ... to reach a certain issue, not whether the arbitrators correctly decided that issue,” reads the power to vacate an award because arbitrators “exceeded their powers” as narrowly as it can, giving it “the narrowest of readings,” and will uphold an award that has even a “barely colorable justification,” meaning any reasonable basis at all.^6,17

A panel’s pre-hearing security is not the same as security a statute makes a party post to get into court. In the Banco case one party argued security was also required under New York Insurance Law section 1213. That statute sets a separate, pre-answer security rule: an unauthorised foreign or alien insurer must post cash, securities or a bond sufficient to secure any final judgment before it files a pleading in a New York court, unless it is licensed or holds qualifying trust funds. That is a court-entry rule, not a panel order. State solvency law separately keeps assets in the US behind reinsurance: under the NAIC Credit for Reinsurance Model Law (Summer 2019 edition), a single reinsurer’s (assuming insurer’s) trust must keep “a trusteed surplus of not less than $20,000,000,” though a certified reinsurer can post reduced collateral. The AAA procedures also give the arbitrator interim-measures power, with security for their cost (Rule R-37).^5,6,7,8

Are reinsurance arbitrations confidential?

In US practice there is no legal presumption of confidentiality, so the parties rely on the arbitration clause, a confidentiality agreement or a panel order. The industry treats reinsurance arbitrations as confidential in most cases, but detail can surface when a party goes to court to confirm or vacate an award, so entering the award as a judgment can itself put the dispute on the record.^1,2

A London-seated arbitration is different: confidentiality is implied by law. In Michael Wilson & Partners Ltd v. Emmott the Court of Appeal of England and Wales held that the obligation of confidentiality arises as an essential corollary of the privacy of arbitration proceedings, subject to exceptions such as consent, an order or leave of the court, protection of a party’s legitimate interests and the interests of justice.¹⁴

How do US and London reinsurance arbitrations differ?

US and London reinsurance arbitrations run on the same skeleton, a party-appointed panel reading the contract as an honourable engagement, but differ on four things: whether a party arbitrator may advise the side that appointed it, how far ex parte contact is allowed, whether the award gives reasons, and who pays the costs.¹

What will a court review, and how is an award enforced?

A reinsurance award is enforced by taking it to court to be confirmed as a judgment, and review is narrow. The Federal Arbitration Act makes a written arbitration agreement “valid, irrevocable, and enforceable” (9 U.S.C. section 2), and lets a court vacate an award only on limited grounds, such as the arbitrators having “exceeded their powers” (9 U.S.C. section 10(a)(4)). For definitions of the two terms courts use, see vacatur and set aside.^6,16,17

For cross-border reinsurance the New York Convention governs. It requires a court to refer the parties to arbitration and lets a court refuse to recognise an award only on the Convention’s narrow grounds, including that enforcement “would be contrary to the public policy of that country” (article V(2)(b)). The harder question is whether a state law voiding insurance arbitration can defeat the clause at all. The McCarran-Ferguson Act lets a state insurance law override, or reverse preempt, a federal Act that does not specifically relate to the business of insurance (15 U.S.C. section 1012(b)), so a state anti-arbitration insurance statute can void a policy’s arbitration clause, at least a purely domestic one, but the courts have now held it cannot reach a Convention-governed international clause.^6,9,15

In that 2025 decision the Second Circuit abrogated its own 1995 ruling and held article II(3) “clearly self-executing,” so a Louisiana insurance statute did not reverse-preempt it. These are direct-insurance and reinsurance clause cases, cited only for the cross-border point; the split is about international policies, and a purely domestic clause in an anti-arbitration state stays void. In the states we have checked, reinsurance and insurer-to-insurer contracts are commonly spared by these carve-outs. The full enforceability question, including why article II(3) displaces the state ban and the state by state detail, is in insurance arbitration clauses, the wider enforcement picture in AI and award enforcement, and the valuation-only alternative to a coverage fight in insurance appraisal.^9,13

What makes reinsurance arbitration fair and fast?

In our view, reinsurance arbitration is already a rulebook process, and that is its strength. The dispute runs on a written clause; where it is thin the parties can adopt the ARIAS.U.S. rules or the AAA’s reinsurance procedures, and the panel reads the treaty as an honourable engagement under the industry’s own custom and practice. On the market’s own account, an informal process has grown formal and litigation-like, and may be no cheaper or faster than court. What keeps each case fair and fast is sameness: running it the same way every time. A panel built by a transparent, partly randomised umpire procedure, a named umpire who decides, a clear ex parte cut-off, and security the panel can order, which a court confirmed on the narrow question of power, not the merits. It also means a record each side can check and a court can rely on, which the US one-line award gives least of. Any AI belongs only where the rules already put people: reading and drafting, never deciding, so the arbitrator still decides and the award still states why.^1,2,5,6