Page 184 - Fire Insurance Ebook IC 57

Fire and Consequential Loss Insurance

accept any cession within the scope of the
treaty. This facilitates the underwriters and
enable the insurers to give large covers
immediately. For facultative method, the
reinsurer has the right to accept or reject the
cession.

(ii) Treaty reinsurance involves less labour and general
costs as the acceptances are dealt in bulk with
periodic submission of information, whereas the
facultative treaty is necessary to be treated
individually , and so requires considerable
documentation, and hence more time and cost.

(iii) The rights and obligations of each party is clearly
mentioned in the treaty agreement whereas the
facultative contract being a brief separate
document is lead to the problem of different
interpretations.

(iv) From reinsurer's point of view , the treaty method
ensures a constant and regular flow of business

Sashi Publications - www.sashipublications.com 197

Copyright@ The Insurance Times. 09883398055 / 09883380339