Page 18 - Reinsurance Management IC85
P. 18
Reinsurance Management
Q. What is facultative obligatory cover? What
are its benefits?
Facultative obligatory reinsurance arrangements are
contracts which combine some of the principles of both
the facultative and the treaty method of proportional
reinsurance. Under such covers, the ceding company
is not bound to automatically cede to the treaty but
has the right of making cessions where it chooses to
do so.
Benefits
a) To provide additional capacity after shares have
been allocated to quota share and surplus treaties.
b) To maintain acceptance limits large enough.
Q. What is priority cession? What are the cases
where it is resorted to? What are its
advantages?
A priority cession is reinsurance which is ceded before
ceding to the company's normal treaties. This
arrangement is resorted to in the following cases.
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