The Association of Run-off Companies (ARC) is to launch the ARC Protocol, a process designed to remove uncertainty from the commutation process, in January 2004.
ARC said the Protocol was a formula which would reduce disputes between cedants and reinsurers.
It said its members had called for action in response to the increasing insistence by some reinsurers that commutations were not valid payments of claims, and were therefore not recoverable under contracts of reinsurance.
ARC chairman David McGuigan said: "The ARC Protocol actively promotes certainty- it is the only way forward that will provide a mechanism to avoid many years of dispute, expensive arbitration and litigation and will be in the best interests of those members, and of all other market participants, who become signatories."
McGuigan said ARC was hopeful of a successful take-up of the Protocol due to strong informal support during its development.
