Page 13 - Reinsurance Management IC85

The Insurance Times

Q. When facultative reinsurance is used?

Facultative reinsurance is used under the following
circumstances;
1. Where automatic treaties are fully used with a

balance of risk yet to be reinsured.
2. When the risk is excluded from the treaty.
3. Where the ceding company does not want its treaty

to be loaded with poor risks.
4. For certain special classes of risks where the

insurer does not have an automatic treaty,

Q. You have been appointed as the financial
adviser to "Samriddhi Life Insurance
Company Ltd.,". The Board of Directors has
asked you to recommend suitable limits for
reinsurance. Explain briefly in a note setting
out the factors you would consider.

Ans: There should be fairly high limits to cover a good
majority of the loss exposures and the limits must be
considered along with the retention. Large limits are
sought especially in pro-rata and per risk or per policy

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