Understanding the Intermediary Clause in Legal Agreements
Definition & meaning
An intermediary clause is a provision found in reinsurance agreements that specifies the intermediary responsible for negotiating the terms of the agreement. This clause typically ensures that all credit risks are transferred to the reinsurers. Furthermore, it may state that payments made by the cedant (the party transferring risk) to the intermediary are considered as payments to the reinsurer. Conversely, payments made by the reinsurer to the intermediary are not recognized as payments to the cedant until those funds are actually received by the cedant.
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Intermediary clauses are primarily used in the context of reinsurance agreements. These agreements are common in the insurance industry, where one insurance company (the cedant) transfers a portion of its risk to another (the reinsurer). Understanding intermediary clauses is crucial for parties involved in such agreements, as they dictate the flow of payments and the assumption of credit risk. Users can manage these agreements effectively using legal templates available from sources like US Legal Forms, which provide professionally drafted documents tailored to specific needs.
Key Legal Elements
Real-World Examples
Here are a couple of examples of abatement:
Example 1: A health insurance company (the cedant) enters into a reinsurance agreement with a reinsurer to cover high-cost claims. The intermediary, a reinsurance broker, negotiates the terms. The intermediary clause specifies that payments from the cedant to the broker will be treated as payments to the reinsurer, ensuring that the reinsurer receives funds promptly.
Example 2: (hypothetical example) A property insurance company uses an intermediary to negotiate a reinsurance deal. The intermediary clause states that the reinsurer's payments to the intermediary do not count as payments to the property insurer until the insurer receives the funds directly.
Comparison with Related Terms
Term
Definition
Key Differences
Reinsurance Agreement
A contract between an insurer and a reinsurer.
Focuses on the overall agreement rather than specific clauses.
Intermediary
A third party that facilitates negotiations between cedants and reinsurers.
Refers specifically to the party involved in the negotiation process.
Common Misunderstandings
What to Do If This Term Applies to You
If you are entering a reinsurance agreement, it's essential to understand the intermediary clause and its implications for payment and risk transfer. Consider using legal templates from US Legal Forms to draft or review your agreement. If you find the terms complex or unclear, consulting with a legal professional can provide clarity and ensure your interests are protected.
Quick Facts
Attribute
Details
Common Use
Reinsurance agreements
Key Parties Involved
Cedant, intermediary, reinsurer
Risk Transfer
To the reinsurer
Key Takeaways
FAQs
An intermediary clause is a provision in a reinsurance agreement that outlines the role of the intermediary and the treatment of payments between the parties involved.
This clause helps clarify the flow of payments and the assumption of credit risks, which is vital for all parties in a reinsurance agreement.
Yes, using legal templates can help you draft your own agreement, but consulting a legal professional is advisable for complex situations.
