1.          Relation to the PICC

C1        Article 2.1.3 is similar to but not modeled on Article 2.1.16 PICC. Article 2.1.3 describes in more detail the contents and extent of the duty of confidentiality. While Article 2.1.16 PICC only covers information given as confidential, Article 2.1.3 extends the duty to all information. While Article 2.1.16 PICC restricts the duty of confidentiality to information provided in the course of contract negotiations, Article 2.1.3 does not contain such restrictions. Whereas Article 2.1.16 PICC does not list any exceptions, Article 2.1.3 lists typical examples where disclosure of information is permitted. Thus, Article 2.1.3 supersedes Article 2.1.16 PICC as far as disclosure of information to third parties is concerned.

C2        Article 2.1.16 PICC covers a further aspect of the duty of confidentiality which is not covered under Article 2.1.3. Article 2.1.16 PICC prohibits an improper use of confidential information obtained in the course of negotiations. The second sentence of Article 2.1.16 PICC provides that the remedy “for breach of that duty may include compensation based on the benefit received” by the party improperly using the information. Improper usage of information is not covered by Article 2.1.3, and Article 2.1.16 PICC remains applicable in that respect unless otherwise provided in the contract of reinsurance.

2.          Parties should take adequate care to avoid unauthorized disclosure of information to third parties

C3        In application of the principle of utmost good faith, Article 2.1.3 obliges the parties to a contract to treat information obtained pursuant to the relationship as confidential. This requires the parties to adopt adequate measures to prevent the unauthorized disclosure of information.

C4        The duty of confidentiality applies during the negotiation, the performance of the contract and continues thereafter.

Illustrations

I1.         Through the contracting process, Reinsured A becomes aware that Reinsurer B has been accused of sexual harassment by employees of a particular office. Reinsured A should not be disclosing the information, even if there is pending litigation that is not sealed but is not generally known.

I2.         Reinsurer B discovers from the contracting process that Reinsured A has been losing market share in an important jurisdiction and that it is planning on terminating an advertising campaign that it has deemed unsuccessful. Even though not important to the contract between Reinsured A and Reinsurer B, the information is confidential and should not be disclosed by Reinsurer B.

3.          The breadth of confidentiality

C5        Of particular importance is the protection of the intellectual property and trade or business secrets of the parties. Intellectual property includes contract language, customer information, and databases used by the parties; it is not limited to inventions of machinery, software, and similar products.

Illustrations

I3.         Reinsurer B develops a particular structure for reinsuring risks that is unique to the contract or an innovation by Reinsurer B. Reinsured A and its agents should not share this information with others, particularly competitors of Reinsurer B.

I4.         Reinsured A develops unique policy language narrowly tailored to eliminate a particularly vexing risk without undermining the overall breadth of the general liability coverage it writes and has made this product available only to particular customers. This product design is the intellectual property of Reinsured A and if treated as confidential by Reinsured A should not be disclosed by Reinsurer B. However, if Reinsured A uses the design of the policy in its general marketing efforts, the information is no longer confidential.

C6        The parties shall not disclose any preferential treatment provided in the contract that is not extended to other insurers or reinsurers.

C7        The protection of confidentiality should not be so broadly construed as to prevent effective business communication for placing risks.

C8        This provision of the PRICL is not designed to prohibit use of information in the ordinary course of seeking to convince retrocessionaires to subscribe to a risk. This is implicitly authorized by the nature of reinsurance and retrocession.

Illustration

I5.         Reinsured A provides information to Reinsurer B. Reinsurer B seeks to obtain a retrocession agreement with Retrocessionaire C. Reinsurer B is allowed to disclose information provided by Reinsured A to the extent necessary to permit Retrocessionaire C to assess the risk and determine whether to participate.

C9        The duty of confidentiality is subject to reasonable exceptions. For example, a party to a contract may make disclosures to third parties where required by law. This will be the case, e.g., for required disclosures to supervisory authorities. The duty of confidentiality is not an evidentiary privilege that prevents legitimate inquiry by authorized regulators or officials with supervisory authority. In addition, notwithstanding the duty of confidentiality, reinsureds and reinsurers logically must be permitted to disclose information required by professional advisers, statutory auditors and retrocessionaires.

4.          Non-disclosure agreements

C10     Under the PRICL, the parties to a contract of reinsurance are free to provide their own specific rules regarding use of information. Such situation-specific agreement is common, with many or perhaps most reinsurance agreements also containing a non-disclosure agreement (“NDA”) agreed upon by the parties. Examples of NDAs are attached to the PRICL as Annex C. NDAs could be based on Article 2.1.3 whenever the parties subject their contract to the PRICL.