Category: Insurance case law · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed June 2026
Court of Appeal authority on the operation of “follow the settlements” clauses in reinsurance, with continuing relevance to aggregation and claims cooperation disputes.
Insurance Co of Africa (ICA) was a direct insurer that had reinsured part of its book with Scor (UK) Reinsurance Co Ltd. ICA settled a number of claims with its insureds and presented those settlements to Scor for reimbursement under the reinsurance contract.
The reinsurance contract contained a “follow the settlements” provision — at the time, a clause increasingly common in London market reinsurance, the precise scope of which was still being worked out by the courts. The clause obliged the reinsurer (in broad terms) to follow settlements made by the cedant, subject to certain conditions and limits.
Scor declined to indemnify in respect of some of the underlying settlements, arguing that they fell outside the scope of the reinsurance cover, that ICA had not acted in a businesslike manner in reaching them, or that the settlements had been made without sufficient regard to defences available under the underlying policy. ICA contended that the follow-the-settlements clause obliged Scor to reimburse the settlements without re-examining the merits of the underlying claims.
The case proceeded to the Court of Appeal, where Robert Goff LJ delivered an influential judgment articulating the principles governing follow-the-settlements clauses in English reinsurance law.
The dispute mattered greatly because the follow-the-settlements clause is a defining feature of London market reinsurance and shapes both the cedant’s freedom of action in settling underlying claims and the reinsurer’s ability to second-guess those decisions.
The central issue was the proper construction and scope of the “follow the settlements” clause in the reinsurance contract. In particular, the court had to identify the conditions under which a cedant could oblige a reinsurer to follow a settlement, and the circumstances in which a reinsurer could decline to follow on the grounds that the underlying settlement was not within the cover, was not made in a businesslike manner, or was otherwise improper.
The case also touched on the relationship between follow-the-settlements and aggregation: a cedant’s settlement of underlying claims could include implicit or explicit aggregation positions, and the question arose whether a reinsurer following settlements was bound by those positions or could test them on construction.
The Court of Appeal articulated what became the foundational English law principles on follow-the-settlements. Robert Goff LJ’s judgment identified the conditions that must be satisfied for a cedant to oblige its reinsurer to follow a settlement:
Where those conditions are met, the reinsurer is obliged to follow the cedant’s settlement without re-examining the merits of the underlying claim. The clause exists precisely to spare the reinsurer (and the cedant) from duplicate litigation of the underlying liabilities.
But the clause does not give the cedant carte blanche. The reinsurer remains entitled to test whether the settlement is within the cover as a matter of contractual construction. If, for example, the underlying claim plainly falls outside the scope of the reinsurance, the cedant cannot dress it up as covered by the simple device of settling it and presenting the settlement.
The judgment also confirms that the reinsurer is not bound by the cedant’s mistakes of law: if the cedant has settled on the basis of a misconception about coverage, the reinsurer can challenge that misconception.
The principles set out in Scor have been refined and applied in many subsequent cases, but the basic structure — arguable cover plus honest and businesslike conduct — remains the touchstone in English law.
A “follow the settlements” clause in reinsurance obliges the reinsurer to follow a cedant’s settlement provided (i) the settlement arguably falls within the risks covered by the reinsurance as a matter of contractual construction, and (ii) the settlement was made honestly and in a businesslike manner. The clause does not require the reinsurer to follow settlements that fall outside the cover, nor does it preclude the reinsurer from challenging the cedant’s classification of the loss as a matter of contractual construction.
Insurance Co of Africa v Scor is the foundational English authority on follow-the-settlements and remains routinely cited at every level of the English courts. It is essential reading for any practitioner advising on reinsurance.
For cedants, the case is both a comfort and a discipline. It is a comfort because it confirms that proper, businesslike settlements within the scope of the cover will bind the reinsurer. It is a discipline because it imposes obligations of good faith and businesslike conduct on the cedant’s claims handling, and confirms that the reinsurer can challenge settlements that exceed the scope of cover.
For reinsurers, the case provides a framework for resisting settlements that overreach the cover or that depend on contestable construction. In aggregation disputes — where the cedant’s classification of losses may be decisive — Scor allows the reinsurer to test the classification as a matter of contractual construction rather than simply rolling with the cedant’s preferred treatment.
For brokers structuring reinsurance programmes, Scor underscores the importance of clear cover language. The narrower or more ambiguous the underlying language, the more scope a reinsurer has to challenge settlements and the less protection a follow-the-settlements clause provides.
The case sits at the intersection of aggregation, claims cooperation and follow-the-settlements doctrines, and remains a key reference point in the modern reinsurance market — including in long-tail liability, catastrophe and complex commercial property classes.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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