In the reinsurance context, a usual query that arises in almost
any single reinsurance transaction or contract where some money is
advanced or handed over between the parties is whether it is
possible to set-off mutual debts within an insolvency
proceeding.
Set-off is an equitable right that allows the parties to a
contract to cancel or offset mutual debts to each other by
asserting the amounts owed, subtracting one from the other and
paying only the balance.
The interest of the parties to set-off amounts arises, for
example, in VIF (Value in Force) transactions, which imply
monetizing the value in force of an insurer's individual life
risk portfolio to allow such insurer to exchange the expectation of
future cashflows for an upfront amount of capital. These VIF
transactions, quite frequent in Europe in the last years, are
structured through a reinsurance treaty whereby the cedant cedes
the defined book to the reinsurer in exchange of an upfront
reinsurance
