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?
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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