Page 61 - Life Insurance underwriting Ebook IC 22

2. Learn about the different types of reinsurance

2.1. Reinsurance on facultative basis

✓In this method the risk is on individual business basis

✓The direct company provides the reinsurer detailed information on
each case to be ceded

✓It this method the reinsurer independently underwrites the risk
and can propose different decisions

✓The reinsurer has the option to either accept the risk or decline the

risk.

✓If the risk is accepted by the reinsurer, it is appointed between the

direct insurance companies

a) Apportionment of the original sum assured
b) Pre decided losses in percentage terms

c) Premium distribution criteria

✓Copies of all relevant documents are to the reinsurer for their
consideration and acceptance.

Facultative reinsurance is generally used when the total death

benefit in force and that applied for exceed the limit as defined in the
reinsurance treaty.

Facultative shopping

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