Top reinsurance executives called on their own to write better contracts with ceding insurers in an attempt to cut down on the massive number of disputes currently in arbitration.

Although the confidential nature of the arbitration process ? commonly used by insurers and reinsurers when the latter disputes payment of a claim ? means the root cause of each dispute and the total number of cases is unknown, leading reinsurers taking part in a discussion at the Hawksmere 18th annual reinsurance congress last week agreed that the level of cases has escalated in recent years largely because of difficult- to-interpret contract wording.

Former St. Paul Re CEO Mark Wigmore said the increase of disputes was such that ?arbitration initiation is becoming more and more a part of the claims process.?

Panellists said the high level of arbitrations waiting in the wings, could be attributed to an increase in the number of disputes but also a limited pool of experienced arbitrators. Arbitrations generally comprise three arbitrators but who appoints them differs between countries.

The end result is a handful of those who handle arbitrations being called on for an increasing load of cases.

Former Mutual Risk Management CEO Robert Mulderig said: ?It is incredibly slow. Good luck finding three arbitrators that have some time to devote before the end of this decade.?

Industry lawyer Ronald Jacks, speaking from the audience, blamed the massive number of outstanding arbitrations on the ?unwillingness of arbitrators to keep feet to the fire,? and called on time limits to be set on the process.

Mr. Jacks said he was speaking from experience after being involved in 150 arbitrations in the last 25 years between parties all around the world.

He called on arbitrators ? with about 20 percent of those handling about 80 percent of the cases ? to meet a ?moral, ethical responsibility to take on fewer cases?.

Hannover Re board chairman Wilhelm Zeller said a lack of underwriting discipline could also be behind disputes with the industry again dealing with the all-too-familiar scenario seen after previous soft phases of the underwriting cycle, where competitive forces lead players to write business despite it being unprofitable to do so.

?We are seeing the d?j? v? of every soft market.

?Those who have written tonnes of business in the soft market find out what they have written,? he said, pointing to some companies posting high combined ratios.

Re/insurers measure underwriting profitability with what is called a combined ratio, which is calculated as the sum of the claims and claim expense ratio and the underwriting expense ratio.

A combined ratio below 100 percent generally indicates profitable underwriting before any investment income.

In contrast, a combined ratio over 100 percent generally indicates the company has written business at a loss.

Mr. Zeller said that disputes are increasingly following the ceding company?s financial audit because reinsurers might dispute their obligation to pay claims if they hear that auditors are questioning the rates the insurer wrote business at.

President of Quanta?s US reinsurance arm Rick Pagnani agreed that underwriting discipline could help lessen the chance of a claim ending in dispute.

And Mr. Zeller shot down the widely held view that reinsurers were disputing claims as a way to try and get out of paying claims.

?Reinsurers cannot get a reputation of not paying claims.?

He added that by and large disputes, in his experience, were ?restricted to God?s own country ? the US?, saying that Hannover Re, which writes business globally, only has one dispute outside of America.

The jury was out however on whether the US and UK was a better place to try and settle a dispute.

Mr. Zeller pointed out that Hannover Re had fared better in a dispute settled by arbitration in the UK because they were better compensated with an award that included interest and legal fees.

But Mr. Mulderig said there were only ?subtle, not fundamental differences? between the process in the US and UK, such as the English arbitrators having a reputation of sticking a little more closely to the contract.

Mr. Wigmore said the UK had the advantage of all three arbitrators being neutral from the parties in dispute, but he conceded that it some might see it as being in the best interest of each party to go the US route where they are able to appoint their representative to make sure all details of their case was understood.

?In the US, arbitrations are confidential and not precedent setting so companies need the one they appoint to be an advocate,? he said.

Mr. Zeller concluded that there was hope for less fights in the future.

?We just have to write a better reinsurance contract.

?We are the only industry that cannot write a contract where at the end of the day, both parties can agree to what that meant.?

But Mr. Wigmore said hammering out clearer contracts would not solve all woes.

?Writing better contracts is key, but you can?t foresee planes flying into buildings and four storms hitting in six weeks.?

Although some companies might try and settle disputes through mediation, many go the arbitration route because its ruling is binding.

Other parties may enter into a commutation agreement which effectively ends the reinsurance agreement before its expiry date, but panel participants cautioned that this could have a negative impact on an insurer?s income statement as it left the corporation with a lower reinsurance recoverables balance and greater risk retention.