Special Commutation Clause Samples
A Special Commutation clause allows parties to an insurance or reinsurance contract to settle all present and future obligations under the agreement for a mutually agreed lump sum payment. In practice, this clause is typically invoked when both parties wish to terminate their ongoing relationship and resolve any outstanding or potential claims, often due to changes in business strategy or risk appetite. The core function of this clause is to provide a clear and final resolution of liabilities, thereby eliminating future uncertainty and administrative burden for both parties.
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Special Commutation. A. The Company may require commutation of that portion of any loss hereunder represented by any outstanding claim or claims, including any related loss adjustment expense, plus unearned premium hereunder, if any remains, if the Subscribing Reinsurer is a Special Circumstance Reinsurer. "Outstanding claim or claims" shall include claims incurred but not reported, as established by the Company, including any billed yet unpaid claims.
B. If the Company elects to require commutation as provided in paragraph A above, the Company shall submit a Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Company. Such Statement of Valuation shall include the elements considered reasonable to establish the loss and shall set forth or attach the information relied upon by the Company and the methodology employed to calculate the loss. The Subscribing Reinsurer shall then pay the amount requested within 10 days of receipt of such Statement of Valuation, unless the Subscribing Reinsurer needs additional information from the Company to assess the Company's Statement of Valuation or contests such amount.
C. If the Subscribing Reinsurer needs additional information from the Company to assess the Company's Statement of Valuation or contests the amount requested, the Subscribing Reinsurer shall so notify the Company within 15 days of receipt of the Company's Statement of Valuation. The Company shall supply any reasonably requested information to the Subscribing Reinsurer within 15 days of receipt of the notification. Within 30 days of the date of the notification or of the receipt of the information, whichever is later, the Subscribing Reinsurer shall provide the Company with its Statement of Valuation of the outstanding claim or claims as of the last day of the month immediately preceding the month in which the Company elects to require commutation, as determined by the Subscribing Reinsurer. Such Statement of Valuation shall include the elements considered reasonable to establish the loss and shall set forth or attach the information relied upon by the Subscribing Reinsurer and the methodology employed to calculate the loss. The Subscribing Reinsurer shall pay the amount due the Company, if any, plus any ceded unearned premium reserves with its Statement of Valuation.
D. In the event the Subscribing Reinsurer's Statement of Valuation of ...
Special Commutation. A. In the event a Subscribing Reinsurer meets one or more of the following conditions, the Company may require a commutation of that portion of any excess loss hereunder represented by any outstanding claim or claims, including any related loss adjustment expense:
1. The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- (including any “Not Rated” rating) and/or Standard & Poor’s rating has been assigned or downgraded below BBB+ (includes any “NR” rating); or
Special Commutation. A. In the event a Reinsurer is subject to any of the circumstances enumerated in paragraph A of the Special Termination Article, the Company may require a commutation of that portion of any excess Loss hereunder represented by any outstanding obligations of the Reinsurer. "Outstanding obligations" shall include but not be limited to: 19\AQUA1007Page 3 AONEmpower Results®
1. Loss and benefits and Loss Expense paid by the Company but not recovered from the Reinsurers;
2. Loss and Loss Expense reported and outstanding;
3. An allowance for incurred but not reported Losses and incurred but not reported Loss Expenses as carried by the Company on its books; and
4. Unearned premium (if applicable).
B. If the Company elects to require commutation as provided in paragraph A above, within 30 days after notifying the Reinsurer of its election to require commutation, the Company shall submit a statement of valuation of the Reinsurer's outstanding obligations as of the effective date of the commutation. Such statement of valuation shall include the elements considered reasonable to establish the excess Loss. Within 30 days of receipt of such statement of valuation, the Reinsurer shall pay the amount requested.
C. Payment by the Reinsurer of the amount agreed in accordance with paragraph B above shall, effective with the date of commutation, release the Reinsurer from all further liability for any outstanding obligations, known or unknown, under this Contract and shall release the Company from all further liability for any adjustment or return amounts including, but not limited to, salvage or subrogation, known or unknown, to the Reinsurer under this Contract.
D. This Article shall survive the expiration of this Contract and the termination of any Reinsurer's percentage share in this Contract.
Special Commutation. A. In the event a Subscribing Reinsurer meets one or more of the following conditions, the Company may require a commutation of that portion of any excess loss hereunder represented by any outstanding claim or claims, including any related loss adjustment expense:
1. The Subscribing Reinsurer's A.M. Best's rating has been assigned or downgraded below A- (including any "Not Rated" rating) and/or Standard & Poor's rating has been assigned or downgraded below BBB+; or
2. The Subscribing Reinsurer has ceased assuming new or renewal property and casualty treaty reinsurance business.
Special Commutation. A. If the Company experiences a 33 l/3% or greater decrease in its Consolidated Statutory Policyholders' Surplus from the amount reported in its Statutory Annual Statement as of December 31, 2002 (the "Triggering Event"), the Reinsurer shall have the sole option to commute this Contract and to commute all outstanding liabilities (the "Special Commutation") at any time by giving the Company 15 days' prior written notice.
B. Where applicable, the Company shall notify the Reinsurer no later than five business days from the date of the Triggering Event. When the Reinsurer is on notice of the Triggering Event, the Reinsurer shall notify the Company within a reasonable time thereafter whether or not it will exercise its right of Special Commutation. Failure by the Company to so notify the Reinsurer or failure by the Reinsurer to invoke Special Commutation after the Triggering Event shall not limit the right of the Reinsurer to invoke Special Commutation in the future; such Special Commutation, however, would take effect on the date of Reinsurer invocation, and not be retroactive back to the date of the Triggering Event.
C. Upon the Reinsurer's Notice of Special Commutation, this Contract shall be automatically commuted in its entirety as of the date of the Triggering Event ("Commutation Effective Date"). In consideration for the full release and settlement by the Company of all current and future liabilities of the Company hereunder, the Reinsurer shall remit to the Company an amount ("the Settlement Amount") equal to the ceded unearned premium reserve as of the Commutation Effective Date plus, at the Reinsurer's option, either (A) the sum of the Company's ceded reserves for the Reinsurer's proportional share of Loss and Loss Adjustment Expense (including Loss and Loss Adjustment Expense incurred but not Effective: January 1, 2003 DOC: May 6, 2003 8958-00-0016-00 ▇▇▇ ▇▇▇▇▇▇▇▇▇ reported) under this Contract as reflected in the latest report received by the Reinsurer, prior to date of notice of Special Commutation or (B) the amount the Company and the Reinsurer agree is the present value of the Reinsurer's proportional share of such Losses.
D. In the event the parties cannot agree on the Settlement Amount, then within 10 business days of the Reinsurer's notice of its election of Special Commutation, the parties shall mutually appoint an independent nationally recognized actuary (F.S.A./F.C.A.S. or A.S.A./A.C.A.S.) (the "Independent Actuary") who shall investigate ...
Special Commutation. A. In the event a Subscribing Reinsurer is subject to any of the circumstances enumerated in paragraph A of the Special Termination Article, the Company may require a commutation of that portion of any excess loss hereunder represented by any outstanding obligations of the Subscribing Reinsurer. For purposes of this Article, "outstanding obligations" shall include, but not be limited to, the following amounts (each determined as of the effective date of the commutation):
1. Reinsurance liabilities that have been paid by the Company but not recovered from the Subscribing Reinsurer;