As the insurance industry has evolved over the years, so too have the types of agreements insurers use to protect their interests. One such agreement is the formal sharing agreement, which is typically used by insurers in specific circumstances.

A formal sharing agreement, as defined by the National Association of Insurance Commissioners (NAIC), is an agreement between insurers that governs the sharing of information related to the investigation and settlement of claims. This type of agreement is typically used in situations where multiple insurers have an interest in a particular claim.

So, what type of insurer uses a formal sharing agreement? The answer is that any insurer that is involved in a claim where multiple insurers have an interest may use a formal sharing agreement. This includes insurers that provide coverage for:

– Commercial general liability

– Professional liability

– Directors and officers liability

– Employment practices liability

– Property and casualty

In cases where multiple insurers are involved, a formal sharing agreement can be beneficial for several reasons. First, it allows insurers to share information related to the claim investigation and settlement, which can help to resolve the claim more quickly and efficiently. Second, it can help to prevent disputes between insurers over the division of the claim costs.

A formal sharing agreement typically includes provisions related to the sharing of information, the coordination of claim investigations and settlement negotiations, and the division of claim costs. The agreement will also typically outline the rights and obligations of each insurer involved in the claim.

It is worth noting that a formal sharing agreement is different from an inter-insurance exchange agreement, which is an agreement between insurance companies that allows for the exchange of policyholder information. Inter-insurance exchange agreements are typically used for underwriting purposes, while formal sharing agreements are used for claims-related matters.

In conclusion, any insurer that is involved in a claim where multiple insurers have an interest may use a formal sharing agreement. This type of agreement can be beneficial for insurers in situations where claims are complex and involve multiple parties. By sharing information and coordinating their efforts, insurers can more effectively investigate and settle claims, reducing the costs associated with disputes and delays.