1.          Proper presentation

C1        Proper presentation of a request for payment means an adequately documented request by the reinsured proving that the claim is covered both under the underlying contract and the contract of reinsurance. Where Article 2.4.3 is applicable, the proof that the claim is covered under the underlying contract may be eased. More specifically, in application of the follow-the-settlements rule, the reinsured merely has to prove that it acted reasonably and in a businesslike manner when settling the claim under the underlying contract and that the claim as recognized is covered under the contract of reinsurance.

2.          Time of payment

C2        Reinsurers will generally earn higher profits by paying claims later rather than earlier. In order to avoid opportunistic behavior, reinsurers are under an utmost good faith obligation to pay properly presented claims as promptly as feasible, particularly when there are no significant disputes regarding coverage. Although there is a general reinsurance norm requiring timely payment of obligations, there is no widely established specific time limit (e.g. within 30 days of notification, within 10 business days of verification). Consequently, parties to a contract of reinsurance wishing a more concrete standard than the general obligation to make timely payment upon reasonable request may elect to establish more concrete and specific procedures and deadlines regarding payment. To the extent the parties do not have a specific agreement, in determining the reasonable promptness of a payment one may have recourse to an established course of dealings between the parties or to a trade usage of the particular reinsurance market.

3.          Interest on late payments

C3        Where payment of a claim is late, the reinsured is entitled to a reasonable and fair rate of interest applied from the time the payment was due until the time of payment. Article 7.4.9(2) PICC provides for interest at the

average bank short-term lending rate to prime borrowers prevailing for the currency of payment at the place for payment, or where no such rate exists at that place, then the same rate in the State of the currency of payment.

If neither of these measures of interest is available, the interest rate is “the appropriate rate fixed by the law of the State of the currency of payment.”

4.          Payment through set-off

C4        Unless otherwise agreed by the parties, set-off in contracts of reinsurance shall be governed by the rules set forth in Chapter 8 PICC (setting forth criteria and protocol for set-off and providing illustrative commentary).

C5        As to the practical importance of payment by set-off in reinsurance transactions, see Comments 7 et seq. on Article 2.3.1.