Commutation rights

{
  "id": "MLC-T-INS-000859",
  "term": "Commutation rights",
  "field": "Insurance and risk management",
  "definition": "A contractual provision in a reinsurance agreement that allows for the full and final settlement of all future obligations between the ceding insurer and the reinsurer. The parties agree on a lump-sum payment from the reinsurer to the cedent, which extinguishes the reinsurer's liability for all past and future claims under the specific treaty. The calculation of the commutation price involves estimating future claim payments and discounting them to a present value.",
  "url": "https://mlchart.com/terminology/insurance/commutation-rights/"
}