Page 313 - Reinsurance Management IC85

The Insurance Times

capacity than is available in the traditional
insurance market;
u the potential to be price competitive over the long
term as a result of their investment strategies;
u as there is little correlation between insurance risks
and other investment risks, relatively little capital
is required.

The disadvantages are:
u declining investment returns not only reduce

traditional reinsurance capacity, but also the
capacity of the other capital markets;
u transactional costs can be high, especially for
smaller transactions;
u in addition, as these contracts are not insurance
there does not need to be an insurable interest
and the same stringent conditions of utmost good
faith.

Q6. What is facultative obligatory reinsurance
and why might it be used?

Ans: Facultative obligatory reinsurance contracts combine

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