The Bordereau That Doesn't Reconcile
You are the treaty underwriter finalizing a 40% quota share on a casualty book. The cedent's most recent monthly bordereau shows ceded premium of $3.1M, but the premium reported on the signed treaty summary is $3.6M for the same period. The difference traces to a block of policies the cedent says were 'written under a prior binder' and therefore excluded. The treaty's cession clause does not mention binders. Separately, the bordereau lists losses on a gross basis with no ceded column, and the cedent's claims team has flagged two claims as 'reserved pending coverage determination' with no amounts. The treaty has a 30-day reporting requirement and a premium payment due in 10 days.
1. What is the contract problem here, and how do you handle the 10-day payment deadline?
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The contract problem is silence: the cession clause does not address binder-written business, so there is no agreed basis to exclude it. Silence does not default in the cedent's favor-it creates an ambiguity that should be resolved by the parties' intent and course of dealing, and the practical answer is a written clarification before the next bordereau, not an after-the-fact exclusion.
On the deadline, pay the undisputed $3.1M and withhold the $500K in dispute with written notice explaining why. Paying the full amount waives leverage; withholding the whole amount breaches a clear obligation. Document the dispute in writing within the reporting window so the 30-day requirement is met and the record shows you acted in good faith.
2. The gross-only loss reporting and the two unpriced claims-what do you require and why does it matter for this treaty?
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Gross-only loss reporting is unusable for a quota share: you cannot verify ceded loss, cannot test the loss ratio against your pricing, and cannot detect adverse development on your share. Require ceded loss columns and a reconciliation to gross, with the cession percentage applied and shown.
The two 'reserved pending coverage determination' claims matter because an unpriced reserve is an unknown liability on your share. Require a best-estimate reserve for each with the basis stated, and a reporting trigger whenever a coverage determination changes the estimate. Without that, your loss ratio is understated in the period and the treaty's reporting clause is being satisfied in form only. Make the corrected format a condition of the next bordereau acceptance.