Insurers and reinsurers who believe that the current system of reinsurance arbitration represents a more efficient way of resolving reinsurance claims find themselves at a disadvantage because of inequities and ambiguities in the U.S. system. As a result, many questions are arising about the current practices in arbitration when instead there should be a greater emphasis on neutral, impartial arbitrators and more meaningful documentation of opinions.

Many insurance and reinsurance companies currently are strained under a large increase of reinsurance arbitration cases. A half century ago, an insurer and reinsurer rarely headed to arbitration because a we-can-work-it-out attitude prevailed. If one of the parties was concerned about an issue, a trip to the backroom or someone's office often resolved the problem. That all changed when claim levels rose. Given the sizeable claims and litigious nature of many business transactions, there's no sign of declining opportunities for reinsurance arbitration.

Since the reinsurance arbitration system in the U.S. differs greatly from the systems used in the UK and Bermuda, insurers and reinsurers should be aware of the relative fairness of those systems. The UK and Bermuda arbitration systems differ from the system in the U.S. primarily in the way party-appointed arbitrators are treated as neutral, impartial, and independent arbitrators. The tripartite (three-member) reinsurance arbitration system is governed by a contract that allows each party to appoint an arbitrator, with a third arbitrator — referred to as the neutral or referee — appointed by the first two party-appointed arbitrators.