Page 12 - Reinsurance Management IC85

Reinsurance Management

profitability as well as the solvency margins of
a company. Reinsurance helps to spread over
a large volume of business, thus reducing
expense ratios. Reinsurers provide technical
assistance to direct insurers and this is a boon
to new insurance companies.

Q. Distinguish between facultative and treaty
forms of reinsurance.

Facultative Treaty
a Reinsurer has option a. Reinsurer is obliged to

to accept or decline. accept.
b. Details of risk are b. No individual risk

offered for each details are provided
individual risk. except as agreed
originally
c. Mostly placed on c. Placed both on
proportional basis. proportional and non
Proportional basis.
d. Cover commences d. Cover is usually annual
and terminates along or continuing with
with original policy. provision for
cancellation.

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