Insurance & Reinsurance: Cost of Insurance Litigation Update

Cost-of-insurance litigation has matured from a novel theory into a standing feature of the US life market. The determinative questions are contractual: what factors the policy permits the insurer to consider, and how the redetermination was documented.

Where insurers can evidence a disciplined, contemporaneous actuarial process tied to the enumerated factors, defences have held. Where the record shows profit-driven adjustment, they have not.

Reinsurers are increasingly drawn into the dispute through recapture and follow-the-fortunes arguments, which raises coordination questions between cedent and reinsurer defence strategy.

The strategic priority is documentation hygiene in the redetermination file, established before any claim, not reconstructed afterward.