Commutation is an established and effective method of discharging reinsurance obligations and achieving finality on Assumed and Ceded relationships. Ranging from the simplest treaties overburdened with administrative costs, to the most complex agreements carrying substantial unpaid losses and IBNR, commutation provides positive and immediate benefits to each party. With the high cost and inherent uncertainty associated with litigation and arbitration, commutation is an alternative way to resolve disputes that is economical and relatively straightforward.
Evaluating and concluding a commutation is a professional exercise, calling into play a variety of specialist skills. Pro has earned an industry-wide reputation for negotiating commutations on portfolios, small and large, between parties that have had long-established relationships and in some cases where the relationship has been severely fractured. We have concluded over 500 commutations since 2005, involving tens of thousands of contracts and generating over $250 million in collective balance sheet gains for our clients.
How we work
Our first priority is to understand your business and your exact requirements. We then undertake an analysis of the portfolio to:
- Establish a clear understanding of the number and type of policies involved and their associated value;
- Reconcile the scope of the commutation with the counterparty as well as the open balances, case reserves and IBNR;
- Calculate the present value, payout patterns and investment income assumptions to establish a range of commutation values that becomes the basis for negotiations
Because of our proven track record and industry-wide network of contacts, we engage with the counterparty early in the process to determine their actual appetite to commute. Our commutation experts then aim to negotiate favourable settlements and terms through face-to-face meetings and written submissions.