Follow The Settlements
Categories: Financial Theory, Regulations
The policy of certain, let's say "entrepreneurial," women in the Old West, who would pack up and follow the railroad workers when they moved their settlement further down the way to build some new track.
Also, it's a term in insurance law.
Insurance companies often sign up for insurance of their own. To limit the risks of having too many claims made at the same time (or having a single massive claim bankrupt it), an insurance company will buy outside insurance from another company, offloading some risk to a reinsurer in exchange for money.
The “follow the settlements” doctrine states that a reinsurance company must follow the decisions of the original insurance company regarding decisions to settle a claim with a client. A reinsurer can’t just declare, “nope...you were stupid to pay that fishy claim, we’re not paying our share.”
Instead, the reinsurer has to "follow the settlements," backing up the original insurer as stated in their reinsurance contract.
It's like going to a bar with your hot-headed friend. He picks a fight with some guy in the line for the bathroom. You feel obligated to back him up, even if your friend's the one who was the instigator. Basic "follow the settlements" logic.