GENERAL KNOWLEDGE

Detailed explanation-1: -Facultative reinsurance is reinsurance for a single risk or a defined package of risks. Facultative reinsurance occurs whenever the reinsurance company insists on performing its own underwriting for some or all the policies to be reinsured.

Detailed explanation-2: -This type of reinsurance is called facultative because the reinsurer has the power or “faculty” to accept or reject all or a part of any policy offered to it in contrast to treaty reinsurance, under which it must accept all applicable policies once the agreement is signed.

Detailed explanation-3: -Two forms of reinsurance contracts are facultative reinsurance and reinsurance treaties. When it comes to facultative reinsurance, the primary insurer covers a single risk or a group of risks that it has on its books. Treaty reinsurance, on the other hand, is insurance obtained from another firm by an insurer.

Detailed explanation-4: -Reinsurers may also buy reinsurance protection, which is called “retrocession.” This is done to reduce any further spread risk and the impact of catastrophic loss events. Overview: Reinsurance is an essential tool insurance companies use to manage risks and the amount of capital they must hold to support those risks.