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Reinsurance Commutation Analysis

Finance Finance Ops Executive Insurance

The prompt

$18

Why this works

Present value comparison is the only financially rigorous way to evaluate commutation — face value comparison systematically overstates the value of holding long-duration ceded reserves.

Risks & review

Commutation is irrevocable. The decision requires board or executive approval, and the loss of ceded IBNR protection should be stress-tested before the decision is finalized.