What is the definition of Facultative Reinsurance?

Facultative Reinsurance refers to the reinsurance policy that gives the insurance company coverage for a certain risk that might be so big or unusual. Examples of the risk that might be covered here would be property insurance for oil rigs or jumbo jets.

The insurance company is not bound to cede the insurance and the reinsurer is not bound to accept the reinsurance. They are free to act based on their best interest. This is different compared to the treaty reinsurance the insurance company or the reinsurance company might have, where there is a prior agreement that the reinsurance will always assume a proportion of the premiums.

Facultative reinsurance may either be proportional or non-proportional. For facultative reinsurance, the reinsurer gets a portion of the losses, as well as the premiums. For non-proportional facultative reinsurance, the reinsurance company will only pay for the losses that go above the insurance company's level of retention.

• Competitive State Fund
• Excess and Surplus Lines
• Commission
• Businessowners Policy / BOP
• Employer’s Liability