Do the New Facts Justify Rescission?
To avoid a misstep, a reinsurer must be aware that the circumstances may justify rescission. The law governing rescission of a reinsurance contract is not simple (for example, the doctrine of uberrimae fidei imposes an obligation of utmost good faith that is specific to reinsurance), and the outcome of disputes over rescission are heavily fact dependent. Nevertheless, a short checklist of questions may be useful to identify situations where rescission may be appropriate. First, are the newly discovered facts contrary to an explicit understanding with the ceding insurer?4 Second, even if they are not contrary to an explicit understanding, are the newly discovered facts contrary to an implicit understanding, i.e., would a prudent underwriter have considered them important to the risk and relied upon them in accepting or pricing the business?5 And third, do the newly discovered facts substantially change the risks assumed by the reinsurer?6 If answers to these questions are positive, a re
