Category: Reinsurance · Reviewed by the Apex broking team · Last reviewed 2026-08-21
Category: Reinsurance Also known as: follow settlements clause, follow the fortunes, loss settlement clause Related concepts: reinsurance to close, reinsurance
Follow the settlements is a clause in a reinsurance contract under which the reinsurer agrees to be bound by settlements the reinsured makes with its own policyholders. Its commercial purpose is to stop the same dispute being fought twice: once between insured and insurer, and again between insurer and reinsurer. Without it, a cedant that settled sensibly could still find the reinsurer arguing that the underlying claim should have been defended. On a claims-made policy circumstance notifications are what protect the current year’s cover.
The related phrase “follow the fortunes” is often used loosely as a synonym. In English practice the operative wording is what matters; clauses vary widely, and some are drafted to be broader or narrower than the market default.
English law does not read the clause literally. The leading authority, Insurance Company of Africa v Scor (UK) Ltd, established that a reinsurer is bound by the cedant’s settlement provided two conditions are met: the claim as settled falls within the risks covered by the reinsurance as a matter of law, and the reinsured acted honestly and took all proper and businesslike steps in making the settlement.
The first proviso does the heavy lifting. It means the reinsurer cannot be made to pay for something the reinsurance never covered, however reasonable the settlement was. The House of Lords in Hill v Mercantile & General Reinsurance confirmed that a follow the settlements clause does not oblige a reinsurer to indemnify a loss falling outside the terms of the reinsurance contract.
The second proviso is a conduct test, not a merits test. It is generally no answer for a reinsurer to argue that the underlying claim would have failed had the cedant fought it to judgment; the question is whether the cedant handled the settlement properly, taking the steps a competent insurer would take before paying.
Follow the settlements rarely stands alone. Reinsurance contracts commonly add a claims co-operation clause, requiring the cedant to notify and consult, or a claims control clause, giving the reinsurer the right to take over the conduct of the underlying claim. The stronger the reinsurer’s control rights, the less the follow the settlements clause is doing.
These provisions can pull against each other. A cedant that settles without obtaining a required consent may find the follow the settlements protection unavailable, even though the settlement was commercially sound. Where both clauses appear, the practical rule is to treat the procedural conditions as conditions, and to document consultation contemporaneously.
Because the second proviso turns on conduct, the file is the evidence. A cedant relying on follow the settlements should ordinarily be able to demonstrate:
Follow the settlements determines how far a reinsurance programme actually responds to what the cedant has paid out. For a commercial buyer the clause is invisible — it sits in a contract to which you are not a party — but its effect is not. Where an insurer is uncertain whether its reinsurance will follow a proposed settlement, that uncertainty shows up as caution: harder positions on coverage, slower agreement, and more pressure on allocation. The same reasoning applies to reserving, since a reserve that reinsurers may not follow is a net reserve, not a gross one.
No. Under English law the reinsurer is bound only where the settlement was made honestly and in a proper and businesslike manner, and the claim falls within the risks covered by the reinsurance as a matter of law.
They are often used interchangeably, but they are not terms of art with fixed separate meanings in English law. What governs is the actual wording of the clause in the contract, read with the provisos the courts have applied to it.
Generally not. It is no defence to say the underlying claim would have failed at trial. The reinsurer can, however, challenge whether the settled claim falls within the reinsurance and whether the cedant handled the settlement properly.
This entry is part of the Apex Insurance Wiki. Last reviewed 2026-08-21. Next review: 2027-02-21.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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