access to records clause
The access to records clause, also referred to generically as an "inspection" or "audit" clause, is one of the most significant contract rights that a reinsurer has under a reinsurance agreement.
Additional Information
The purpose of this clause is to grant the reinsurer the right to inspect the cedent's books and records applicable to the reinsured business. This is one of the few methods reinsurers have to evaluate the business being ceded to them under their reinsurance agreement and to ascertain whether the cedent is following the terms and conditions of the agreement, in particular the accuracy of policy and claim cessions and premium calculations. A typical access to records clause provides as follows.
The reinsurer or its designated representatives shall have free access to the books and records of the company on matters relating to this reinsurance at all reasonable times for the purpose of obtaining information concerning this contract or the subject matter hereof.
More recent access to records clauses are more limited and specific as to the scope, timing, and method of inspection afforded a reinsurer.
Access to records clauses are found in most reinsurance agreements. The right of inspection is so ingrained in the reinsurance industry custom and practice that there is support for the proposition that the reinsurer has this right even in the absence of an express clause.
Synonyms
inspection clause
