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Types of Reinsurance

There are two main types of reinsurance: facultative and treaty. Facultative reinsurance covers individual risks and allows the reinsurer to assess each risk separately before deciding whether to accept it, while treaty reinsurance obligates the reinsurer to accept all risks of a specific type. Both help insurance companies manage risk, but facultative reinsurance tends to be more expensive due to the individual assessment and decision required for each policy.

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136 views1 page

Types of Reinsurance

There are two main types of reinsurance: facultative and treaty. Facultative reinsurance covers individual risks and allows the reinsurer to assess each risk separately before deciding whether to accept it, while treaty reinsurance obligates the reinsurer to accept all risks of a specific type. Both help insurance companies manage risk, but facultative reinsurance tends to be more expensive due to the individual assessment and decision required for each policy.

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ashok karki
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Types of Reinsurance:

There are two types Reinsurance:


Facultative Reinsurance Facultative reinsurance is the type of reinsurance which
covers a single risk. It is considered to be more transaction-based. Facultative
reinsurance allows the reinsurer to assess the individual risk and take a call on whether
to accept or reject it. The profit structure of the reinsuring company plays a part in
deciding which risk to take. In such agreements, the ceding company and the reinsurer
create a facultative certificate that states the reinsurer is accepting a specific risk. This
type of reinsurance can be more expensive for the primary insurance companies.
Reinsurance Treaty In this type, the reinsurer agrees to accept all of a specific type of
risk from the primary insurance company. In treaty contract, the reinsuring company are
bound to accept all the risks that are mentioned in the contract. There are two types of
the treaty contract:

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