Hi, I have a doubt in page 8 of Chapter-12. I think "Commutation" & "Transfer of liabilities" are talking of same thing than why these 2 are provided as separate topic? Please let me know if there is any difference. Regards, Ashok
A commutation and transfer of liabilities are not the same thing. A commutation is when the insured and insurer (or reinsured and reinsurer) agree to terminate the insurance contract that exists between them in return for a agreed payment from the insurer to the insured. Following the commutation the insured no longer has the insurance cover left in place and has to pay any losses that would have previously been met by the insurer himself. A transfer of liabilities, is when one insurer takes on the liabilities previously insured by another insurer. After the transfer the insured still has insurance in place, it is just with a different insurer.
