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    Question

    Which type of reinsurance involves one particular risk

    and is expressed in a reinsurance policy, with each transaction negotiated individually and offering both the ceding company and the reinsurer a free choice?
    A Treaty Reinsurance Correct Answer Incorrect Answer
    B Excess of Loss Reinsurance Correct Answer Incorrect Answer
    C Facultative Reinsurance Correct Answer Incorrect Answer
    D Proportional Reinsurance Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    Facultative Reinsurance: It is that type of reinsurance whereby the contract relates to one particular risk and is expressed in a reinsurance policy.. Each transaction under Facultative Reinsurance has to be negotiated individually and each party to the transaction has a free choice, i.e. for the ceding company to offer and the reinsurer to accept. The main drawback of this type of insurance is the volume of work involved and time taken to cover the risk.

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