Commutations and Solvent Schemes

For many years, reinsurers in run-off have been adopting active (and sometimes aggressive) commutations strategies. This is now being seen as equally relevant to the live underwriter, particularly where discontinued relationships (especially with cedants who themselves are in run-off) are concerned.

Commutation is very much a part of the commercial world in which we live.  The development of a strategy in which commutation negotiation should be initiated is an important management task with which we can assist.

Although most commutations do involve some element of compromise they do also provide cash certainty.  Assessing the cost-benefit positive opportunities and ensuring their realisation is where Helix can help you.

Schemes of Arrangement (under the 1985 UK Companies Act) can be thought of as a sub-set of commutation.  Essentially a Scheme is a forced commutation.  The only option that the creditor has is to decide whether to participate in the scheme process or not.  Firstly you decide whether to be represented at the first creditors’ meeting and then whether to submit a claim under the scheme ~ assuming it receives creditors’ approval and the sanction of the court.

If your claim is relatively small (in your terms) or you do not have sufficient resource to meet the timeframes set by the administrators, you may wish for Helix to manage this on your behalf.  Alternatively you might have a complex contingent claim which requires research into original circumstances together with actuarial and legal appraisal in order to formulate an appropriate contingent claim under the scheme.  Helix has experience of project managing and substantially contributing to such a process.