Glossary Definition: A reinsurance commutation is a financial agreement where a primary insurer and a reinsurer mutually agree to close out and discharge all future, long-tail policy obligations in exchange for a single, immediate capital cash settlement. Executing a strategic reinsurance commutation allows corporate risk entities to completely liquidate aging portfolios, clearing residual exposures and optimizing the overall balance sheets of carriers that operate within run-off insurance
or legacy loss portfolio transfer schemes.
Reinsurance Commutation
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