Page 314 - Reinsurance Management IC85

Reinsurance Management

some of the principles of both facultative and
treaty methods of reinsurance.

Effectively, a facultative obligatory reinsurance
contract is a facility for placing a large number of
individual facultative cessions through a treaty agreed
in advance.

Under this agreement the insurer has the right to cede
risks which the reinsurer is obliged to accept.

Such arrangements provide considerable flexibility to
the ceding company and therefore require a high
degree of trust to exist between the parties.

In terms of operation, the capacity is set as a multiple
of the ceding company's gross retention and is set
out in advance.

Often these arrangements are used to provide the
insurer with additional capacity after other quota share
and surplus treaties have been filled without the

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