Facultative reinsurance

Reinsurance of risks on an individual basis. The reinsurer has the option to accept 100% of the risk, a proportion of it or to reject the business. Facultative reinsurance is used to (i) reinsure special risks outside the scope of treaty reinsurance; (ii) reinsure amounts in excess of existing treaty limits; (iii) restrict the liability of the insurance (ceding) company; (iv) reduce the exposure of the insurance company resulting from accumulation of risks within a certain area; (v) obtain capacity when the volume of business does not justify treaty reinsurance; (vi) enable reinsurers to evaluate underwriting practice of the in- surance company.

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