Each commutation is slightly different - with varying technical issues and chemistry between the counterparties involved. Experience in dealing with complex interactions is critical and negotiators require clear,objective financial criteria in conducting their negotiations in addition to an armoury of subjective issues to throw into the mix when appropriate.

Negotiation does not stop with the counterparty to a transaction. Ultimately a transaction is effected only if it is felt to be advantageous and for run-off companies this usually means reducing uncertainty and bringing closure a step closer. For the proprietors of the business, one objective is value extraction and often this will require further negotiation with the insurance regulators.

James, Brennan & Associates has extensive experience as principal and advisor in a range of transactions, negotiation with counterparties and creating capital models to demonstrate the impact of commutations on the residual portfolio risk.