Türkiye–London Reinsurance Disputes: Governing Law, Aggregation and the Limits of Follow-the-Settlements

A major insured loss in Türkiye may begin as a Turkish insurance matter and end as an English-law reinsurance dispute.

The original policy may have been issued in Türkiye to a Turkish company, covering property, liability or commercial activity located entirely within the country. Yet the insurer may have transferred part of that exposure through facultative or treaty reinsurance placed in the London market, governed by English law and subject to arbitration seated in London.

One economic loss then sits inside several legal relationships.

That architecture matters. Liability under the original insurance does not, without more, establish liability under the reinsurance. A settlement that is defensible between insurer and policyholder may still raise questions of attachment, allocation, aggregation or claims control upstream. A Turkish underlying dispute, of the kind examined in our guide to insurance disputes, claims and arbitration, may therefore have to be understood together with an English-law treaty, a London arbitration agreement and, potentially, enforcement proceedings in Türkiye.

The central question is not whether Turkish law or English law governs "the dispute".

It is which law governs which part of the risk-transfer structure.

That distinction should be identified before the coverage analysis begins.

1. The underlying insurance and the reinsurance are separate legal relationships

Turkish law states the position expressly.

Article 1403 of the Turkish Commercial Code No. 6102 allows an insurer to reinsure the insured interest on terms of its choosing. It also provides that reinsurance does not release the insurer from its obligations toward the original policyholder and does not, merely because reinsurance exists, give that policyholder a direct claim against the reinsurer.

The economic connection between the two contracts is obvious. Their legal identity remains separate.

A Turkish insurer may therefore be required to indemnify its policyholder under the underlying insurance while still facing a genuine dispute as to whether the resulting liability falls within the outward reinsurance.

The distinction becomes especially important after a major settlement.

Suppose a Turkish insurer covers several industrial sites against property damage and business interruption. It protects its own exposure through a London-market excess-of-loss programme. Following a catastrophe, it settles substantial claims under the underlying policies and presents the resulting loss to its reinsurers.

At primary level, the issues may concern the Turkish policy wording, insured peril, causation, exclusions and quantum.

At reinsurance level, the dispute may instead concern the treaty period, attachment point, aggregation wording, fair presentation at placement, notification, claims-control obligations or allocation between treaty years.

The loss has not changed.

The contractual question has.

2. Governing law must be allocated by relationship, not by geography

The fact that the underlying risk is located in Türkiye does not itself determine the law applicable to the reinsurance contract.

Article 24 of Türkiye's International Private and Procedural Law Act No. 5718 permits parties to a contract containing a foreign element to choose the applicable law. Where no valid choice exists, the statute applies its closest-connection rules.

It is therefore entirely possible for the original insurance to be governed by Turkish law while the outward reinsurance is governed by English law.

That does not make Turkish law irrelevant to the wider transaction.

Law No. 5718 separately preserves the operation of Turkish overriding mandatory rules falling within their intended scope, and provides that a foreign rule will not be applied where its application to the particular case would be manifestly contrary to Turkish public policy. Those are targeted safeguards, not a general mechanism for displacing a contractual choice of foreign law.

The correct analysis is therefore more precise than saying that "English law applies".

Counsel should identify at least:

• the law governing the underlying insurance;
• the law governing the reinsurance contract;
• the law governing the arbitration agreement; and
• the legal regime governing recognition or enforcement.

In a well-drafted structure, the answers may be deliberate.

In a disputed one, they may determine the case.

3. English-law reinsurance can place the original underwriting process under scrutiny

Where English law governs the reinsurance contract, the Insurance Act 2015 becomes important at the placement stage.

Reinsurance and retrocession are treated as insurance contracts at common law and, for the purposes of the Act, as non-consumer insurance contracts. In that relationship the cedant is treated as the insured and the reinsurer as the insurer.

The statutory duty of fair presentation therefore applies.

Section 3 requires disclosure of every material circumstance the insured knows or ought to know, or alternatively sufficient information to put a prudent insurer on notice that further enquiries are required. The presentation must also be reasonably clear and accessible, and material factual representations must be substantially correct.

This can turn the placement file into the first battlefield in a major reinsurance claim.

Following a catastrophic loss, the reinsurer may examine what the cedant disclosed concerning concentration of risk, previous losses, engineering surveys, earthquake accumulations, exposure modelling, underwriting practices or material developments at renewal.

The issue is not confined to deliberate non-disclosure. The Act also addresses non-deliberate qualifying breaches by asking what the insurer would have done had a fair presentation been made, including whether it would have declined the risk or written it on different terms.

For a Turkish insurer entering the London market, the practical consequence is significant.

The outward reinsurance dispute may begin years before the loss, with the information assembled and presented during placement.

A sophisticated claims strategy therefore starts with the underwriting file, not merely the claims file.

4. "Back-to-back" cover has limits

Reinsurance is often described commercially as being written "back-to-back" with the underlying insurance.

The phrase is useful, but it can become misleading if treated as a rule of law.

Facultative reinsurance in particular may be intended to reproduce important elements of the underlying policy. Terms may be incorporated "as original". Limits, subject matter or insured perils may correspond closely.

But the reinsurance remains a separate contract.

The House of Lords decision in Lexington v Wasa is a central authority. The underlying insurance and the facultative reinsurance had closely matching wording, but the reinsurance was governed by English law. The House held that the commercial expectation of back-to-back cover could inform construction, but it could not simply make the reinsurer liable for an underlying exposure extending beyond the risk assumed under the reinsurance contract. The reinsured had to establish both that the loss fell within the underlying insurance and that the relevant risk had been assumed under the reinsurance.

The principle is especially relevant where the underlying policy and the reinsurance are governed by different legal systems.

A Turkish court or a Turkish-law settlement may produce a liability at primary level.

That does not automatically enlarge the temporal or substantive scope of an English-law reinsurance contract.

Back-to-back is an interpretative context. It is not a substitute for construing the reinsurance wording.

That proposition should sit near the centre of any Türkiye–London reinsurance analysis.

5. Follow-the-settlements does not create cover that was never written

The same discipline applies to follow-the-settlements provisions.

Their commercial function is important. A cedant should not ordinarily have to establish or litigate the underlying claim and then litigate the same liability from the beginning against its reinsurer.

English law therefore gives real effect to follow-the-settlements wording.

In Assicurazioni Generali v CGU, the Court of Appeal restated the established formulation derived from Insurance Co of Africa v SCOR: a reinsurer may be required to follow a settlement where the claim recognised by the cedant falls within the risks covered by the reinsurance as a matter of law, and the cedant acted honestly and took proper and businesslike steps in reaching the settlement.

Those requirements perform different functions.

The second prevents the reinsurer from simply retrying every reasonable commercial compromise made by the cedant.

The first preserves the boundaries of the reinsurance contract.

A follow-the-settlements clause therefore does not mean that because the cedant paid, the reinsurer pays.

This is particularly important where a settlement resolves several components simultaneously.

A single agreement may compromise claims concerning several insured entities, locations, policy periods or heads of loss. It may include property damage, business interruption, defence costs and disputed coverage components. The insurer may have compelling commercial reasons to reach a global settlement.

The difficulty arises when that global settlement is presented into a reinsurance programme that does not respond globally.

The settlement then has to be mapped back onto the contractual structure.

The practical mistake is to treat the settlement agreement as the end of the dispute.

In a heavily reinsured loss, it may instead become the document that determines whether the next dispute is avoidable.

6. Claims cooperation and claims control can alter the settlement analysis

Follow-the-settlements wording should never be read in isolation from the claims provisions.

A claims-cooperation clause may require notice, information sharing or consultation.

A stronger claims-control provision may require the reinsurer's approval before specified decisions, including settlement, are taken.

The legal effect depends on the particular wording.

The Commercial Court's October 2025 decision in Royal & Sun Alliance v Equitas illustrates how these provisions continue to interact in modern reinsurance litigation. The court considered, among other issues, whether a claims-cooperation provision modified or restricted the operation of a follow-the-settlements clause, and whether proper and businesslike steps had been taken in reaching the underlying settlement.

The case is useful because it reinforces a more general point.

Labels do not decide the contractual consequence.

The questions are whether the relevant clause was triggered, what it required, whether approval or consultation was mandatory, and what consequence follows if the requirement was not satisfied.

That analysis matters in Turkish claims, where the primary insurer may be under substantial commercial pressure to resolve the insured loss while an international reinsurance panel is still reviewing the file.

The solution is not automatically to allow the reinsurer to control the underlying claim.

Nor is it sensible to ignore the reinsurance until after settlement.

The contractual allocation of claims authority should be understood before material decisions become irreversible.

7. Aggregation is often where the economics of the dispute are decided

Many major excess-of-loss disputes are not principally about whether damage occurred or whether it was insured.

They are about counting.

Assume that a cedant retains the first €10 million of each loss and purchases €40 million of cover above that retention.

Ten independent losses of €6 million each may produce no recovery.

A single properly aggregated €60 million loss may engage the layer substantially.

The difference is not semantic.

It is the economic architecture of the cover.

The first question must therefore be the wording of the aggregation provision.

The parties may have chosen "one event", "one occurrence", "one catastrophe", "one originating cause" or another defined unifying factor. Those expressions should not be treated as interchangeable merely because the underlying claims appear commercially related.

Aggregation analysis should begin with the wording, not with the spreadsheet.

That approach has particular force in catastrophe business involving Türkiye.

An earthquake may cause hundreds of claims across different insured locations. Commercially, the losses may look like one catastrophe. The treaty may nevertheless require analysis of the contractual event, geographical and temporal limits, aftershocks, separate physical losses and any applicable hours clause.

The fact that every claim can ultimately be traced back to the same disaster is not necessarily the contractual test.

Recent English authority reinforces the point

In UnipolSai v Covéa, the Court of Appeal considered property catastrophe excess-of-loss reinsurance in the context of Covid-related business interruption losses. The dispute illustrates why the actual contractual unifying term, there "catastrophe", must be construed rather than replaced by a different concept merely because another formulation appears economically convenient.

The same discipline is visible in WRBC Corporate Member v AXA XL, decided by the Commercial Court in April 2026. The dispute concerned the aggregation of numerous underlying cancellation losses under wording requiring losses to arise out of "one event". The court began with construction of the treaty wording before turning to the factual relationship between the individual losses.

The sequence is important.

First identify the contractual unifying factor.

Then test the facts against it.

Not the other way around.

For Turkish catastrophe risks placed into London, that methodological point can determine very substantial recoveries.

8. Allocation solves a different problem

Aggregation asks whether several losses may be treated as one.

Allocation asks where a loss belongs.

Long-tail liabilities can make that distinction particularly difficult.

Professional liability, construction defects, environmental exposure, product liability or occupational disease may implicate several underlying policy years. The outward reinsurance programme may also have changed over that period.

Different years may carry different retentions, limits, exclusions and reinsurers.

Allocation therefore redistributes economic exposure.

The Court of Appeal's decision in Equitas v Municipal Mutual Insurance demonstrates the issue at reinsurance level. The proceedings concerned whether asbestos-related liabilities spanning multiple years could effectively be presented into selected annual reinsurance contracts so as to maximise recovery (the "spiking" problem), or whether the loss had to be treated on another basis.

The unusual asbestos context does not diminish the broader lesson.

A cedant should be able to explain why a loss belongs to a particular year independently of the fact that the selected year produces the best reinsurance result.

An allocation theory constructed only after the recoverable layers have been identified invites scrutiny.

That is particularly true where an underlying settlement has deliberately avoided allocating liability between periods.

Commercial finality at primary level can create uncertainty at reinsurance level.

9. Notice and evidence should be managed before the reinsurance collection is prepared

Large claims rarely arrive fully formed.

A loss may initially appear likely to remain within the cedant's retention. Business interruption then expands. New locations are identified. Experts revise the estimate. Litigation develops. Reserves increase.

By the time the cedant decides that the outward programme will respond, the contractual notification trigger may already have occurred.

Notice clauses differ materially.

Some respond to a loss.

Others respond to a claim, a circumstance, a reserve threshold or a matter reasonably expected to affect the treaty.

A reinsurance programme should therefore be reviewed when the underlying claim becomes material, not years later when the collection is ready to be submitted.

The same principle applies to evidence.

Major reinsurance proceedings may eventually require the underwriting presentation, slip, wording, endorsements, broker communications, exposure data, catastrophe models, bordereaux, reserve histories, expert reports, settlement recommendations, internal approvals, communications with reinsurers and allocation material.

These records should not be viewed as separate underwriting and claims archives.

Once a dispute develops, they form one evidential history.

An exposure model may become evidence of fair presentation.

A reserve history may become relevant to notice.

A settlement memorandum may determine whether the cedant acted properly.

Historic bordereaux may show how both parties themselves understood the treaty.

The strongest reinsurance claim is therefore usually built before any formal demand for payment is made. The same records later carry the insurer's own subrogation and recovery rights against third parties, which is one more reason to keep them as a single file.

10. London arbitration has a new governing-law framework

For London-seated arbitration, the Arbitration Act 2025 has changed an important part of the analysis.

The principal reforms came into force on 1 August 2025. New section 6A of the Arbitration Act 1996 provides that the arbitration agreement is governed by the law expressly chosen for that agreement or, absent such an express choice, by the law of the seat.

The statute also makes a point of particular importance for cross-border contracts: choosing a law for the main contract does not, by itself, constitute an express choice of that law for the arbitration agreement.

Consider a reinsurance treaty providing for "Governing law: Turkish law" and for "Arbitration seated in London".

Under the post-2025 English statutory framework, the general Turkish-law clause should not simply be treated as an express choice of Turkish law for the arbitration agreement itself.

That distinction makes drafting more important, not less.

A cross-border reinsurance contract should address separately the substantive governing law, the seat, the law of the arbitration agreement and the chosen procedural or institutional rules.

The arbitration clause is not administrative boilerplate.

It is a separate legal instrument inside the wider contractual structure.

11. A London award may still finish its journey in Türkiye

The seat of arbitration does not determine where enforcement will ultimately be required.

If the relevant assets are in Türkiye, a London award may eventually have to operate through the Turkish enforcement system, as explained in our guide to the recognition and enforcement of foreign judgments and arbitral awards in Türkiye.

Türkiye and the United Kingdom are both contracting states to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Türkiye applies the Convention subject to reciprocity and commercial-relationship reservations.

That framework substantially facilitates cross-border enforcement, but it does not make enforcement planning unnecessary.

Before arbitration begins, counsel should understand where the respondent's material assets are located, which entity owns them, whether interim protection may be required and in which jurisdictions the award is likely to need recognition.

An award is not an abstract legal victory.

It is an enforcement instrument.

The structure of the case should reflect that from the outset.

12. Parallel Turkish proceedings and London reinsurance arbitration should form one strategy

The original insured's dispute with the Turkish insurer may continue while the insurer is simultaneously preserving or pursuing rights against its reinsurers.

These are legally separate proceedings.

Strategically, they cannot always be treated as separate files.

A pleading before a Turkish court may later become relevant to the reinsurance case.

An expert report prepared for the underlying dispute may affect the causation or aggregation analysis upstream.

A concession made to facilitate settlement may alter the reinsurance position.

A settlement structure that works perfectly between insured and insurer may create unnecessary difficulty in proving which treaty year, layer or category of cover responds.

The role of cross-border counsel is therefore not to merge legally separate relationships.

It is to prevent them from being managed inconsistently.

That distinction matters.

The underlying insurance litigation, outward recovery and arbitration strategy should remain legally distinct but factually coordinated.

13. PRICL 2025: useful, but not governing law by default

The Principles of Reinsurance Contract Law 2025 provide a further reference point for sophisticated international transactions.

PRICL contains specific provisions dealing with claims handling, follow-the-settlements and follow-the-fortunes, loss allocation, aggregation and back-to-back cover. It was developed as a uniform soft-law framework rather than national legislation.

Its formulation of follow-the-settlements is itself instructive: under Article 2.4.3, the principle operates only to the extent that the relevant loss is covered by the reinsurance contract.

That is consistent with the central distinction running through this analysis.

PRICL may be contractually incorporated or may serve as a useful transnational reference, particularly in arbitration.

It should not, however, be confused with English law, Turkish law or mandatory rules applicable under either system.

Its value lies in providing a common language for the reinsurance relationship.

Its existence does not eliminate the need to identify the governing law.

Conclusion

The difficulty of a Türkiye–London reinsurance dispute does not arise merely from the value of the loss.

It arises because the loss changes legal character as it moves through the risk-transfer structure.

At primary level, the question may be whether a Turkish insurer owes indemnity under a Turkish policy.

At reinsurance level, the same payment may become a question of English contractual construction.

If the underlying liabilities are numerous, the dispute may turn on aggregation.

If they span several periods, it may turn on allocation.

If the cedant has already settled, the dispute may concern the scope of follow-the-settlements.

If the reinsurer had contractual control or consultation rights, the claims process itself may become relevant.

If the risk was inadequately presented, the dispute may reach back to placement.

And if the parties chose London arbitration, the arbitration agreement now sits within the post-2025 statutory framework before any eventual award may return to Türkiye for enforcement.

There is therefore no useful answer to the abstract question of whether Turkish law or English law applies.

A substantial cross-border reinsurance matter requires a more exact analysis. Which contract? Which issue? Which law? Which forum? Which assets?

The legal advantage lies in answering those questions before the loss has already been allocated, settled and presented in a way that cannot easily be reversed.

How Terziolu & Partners Can Assist

Terziolu & Partners advises on the Turkish-law and cross-border dimensions of complex insurance and reinsurance matters, including disputes in which Turkish underlying risks interact with international reinsurance programmes.

The firm's role may include analysing the underlying insurance relationship, the outward reinsurance structure, applicable Turkish private international law, claims and settlement strategy, aggregation and allocation issues, international arbitration within our dispute resolution practice, and recognition or enforcement in Türkiye.

Where a matter engages English law or another foreign legal system, the strategy can be coordinated between Istanbul and London with appropriately qualified counsel in the relevant jurisdiction, through cross-border legal coordination.

The objective is not to treat the underlying claim, the reinsurance recovery and the eventual dispute as unrelated mandates. They are separate legal relationships within the same transfer of risk, and they should be managed accordingly. To discuss a reinsurance programme, a settlement or a dispute, contact the firm.

Selected Authorities and Materials

Turkish Legislation

Turkish Commercial Code No. 6102, Article 1403 (reinsurance).

International Private and Procedural Law Act No. 5718 (Official Gazette, 12 December 2007), Article 5 (public policy), Article 6 (Turkish overriding mandatory rules) and Article 24 (law applicable to contractual obligations).

England & Wales

Insurance Act 2015: Part 2 (duty of fair presentation) and Schedule 1 (remedies for qualifying breaches), including their application to reinsurance and retrocession.

Arbitration Act 1996, section 6A (law applicable to the arbitration agreement), inserted by the Arbitration Act 2025.

Principal Reinsurance Authorities

Insurance Co of Africa v SCOR (UK) Reinsurance Co Ltd [1985] 1 Lloyd's Rep 312.

Assicurazioni Generali SpA v CGU International Insurance Plc [2004] EWCA Civ 429: follow-the-settlements.

Lexington Insurance Co v AGF Insurance Ltd; Lexington Insurance Co v Wasa International Insurance Co Ltd [2009] UKHL 40; [2010] 1 AC 180: back-to-back cover, governing law and the scope of the reinsurance risk.

Equitas Insurance Ltd v Municipal Mutual Insurance Ltd [2019] EWCA Civ 718; [2020] QB 418: allocation and "spiking" in long-tail reinsurance.

UnipolSai Assicurazioni SpA v Covéa Insurance Plc [2024] EWCA Civ 1110: catastrophe aggregation under property catastrophe excess-of-loss reinsurance.

Royal & Sun Alliance Insurance Ltd v Equitas Insurance Ltd [2025] EWHC 2704 (Comm): facultative reinsurance, follow-the-settlements, claims cooperation and proper and businesslike claims handling.

WRBC Corporate Member Ltd v AXA XL Syndicate Ltd [2026] EWHC 939 (Comm): aggregation under "arising out of one event" wording.

International Materials

Principles of Reinsurance Contract Law 2025 (PRICL 2025) (full text published by UNIDROIT), including the provisions on claims handling, follow-the-settlements (Article 2.4.3), aggregation, allocation and matching cover.

Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, status of contracting states (UNCITRAL). Türkiye and the United Kingdom are contracting states.