Page 164 - Reinsurance Management IC85

The Insurance Times

Q6. Distinguish between Facultative and Treaty

forms of Reinsurances.

Ans:

Facultative Treaty

Each and every risk is Risk featuring in the

individually ascertained. portfolio insured will

automatically reinsured.

Facultative reinsurance will Large volumes of premium

increase the competitive are ceded away.

edge of the insurer.

Reinsurer can negotiate Premium will be part of

suitable premium. overall portfolio of risks.

There is freedom to offer It is an obligatory to cede all

risk. risks in the portfolio.

Each risk is individually All risks will not be qualified

negotiated. into the treaty as treaty has

certain risks excluded.

Labourious process to discuss Easy to place the risk as the

and finalise a contract. risk is automatically ceded.

Lot of time involved and the

insurer many lose the

business in this delay.

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