Honorable Undertaking

Standing in the shower in the morning is a great time to contemplate the mysteries of the universe. What is the meaning of life? Why do iPhone chargers break so easily? What's the sound of one hand clapping? Who insures insurance companies?

Actually, that last one we can answer. Insurance companies are insured by reinsurance companies. These reinsurers shoulder some of the liability burden carried by insurance companies. This can help them avoid going under if they get slammed with a ginormous claim.

But what happens when the insurers disagree with their reinsurers? How are those disputes settled? If they have an “honorable undertaking” or “honorable engagement” clause in their contract, it means they’re giving an arbiter the right settle their issues, and to use his or her judgment and discretion when doing so. The “honorable” part is the assumption that the arbiter is going to legitimately act in the best interests of both parties, shade-free, and when they’re done, both parties are going to abide by their decision.

This isn’t like taking a dispute to court, where a judge has to abide by certain laws regardless of the ins and outs of the particular situation. There’s wiggle room here.

Now if only we could figure out the iPhone charger thing.