Facultative Reinsurance
Definition
Reinsurance negotiated separately for each individual risk or policy, as opposed to treaty reinsurance which covers a portfolio. Provides flexibility for unique or large risks.
Practical Example
A cedent purchasing facultative coverage for a $500M skyscraper that exceeds treaty limits.
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Related Terms
A reinsurance agreement covering a specified portfolio of risks over a period of time. The reinsurer agrees to accept all risks within the treaty terms, providing automatic coverage.
The insurance company that transfers (cedes) risk to a reinsurer. Also called the ceding company or reinsured. Primary insurers are cedents to reinsurers.