The two primary sections in commutation accounting are labeled for which parties?

• A. Ceding and Reinsure
• B. Commutation and Settlement
• C. Premium and Loss
• D. Policy and Claim

Answer: (A)

In commutation accounting, the focus is on settling ongoing reinsurance obligations by valuing the expected cash flows from both sides of the contract. The ledger is split into two sections, each labeled from a counterparty’s viewpoint: one for the ceding company and one for the reinsurer. This labeling makes it clear what each party is owed or owes, so the two sides can be settled to a single net payment if they agree. Other options don’t fit because they describe processes or components of the business rather than how the commutation ledger is labeled: a process like commutation and settlement; or terms like premium or loss; or policy and claim, which aren’t the labeling convention used here.