What does Facultative Insurance Mean?
Facultative Reinsurance is the form of one kind of reinsurance contract. This insurance is only for an individual specified risk or on a contractual basis. It is negotiated separately for the policy which is to be reinsured.
Generally, it is purchased by the ceding companies for individual risk which are not recovered. Reinsurers help insurance companies in case of claims filed by the various policyholders in during the catastrophic circumstances.
The ceding companies are liable for the reinsured policies. If the insurance company makes any defaults in this case ceding company has to make payment on reinsured policy risks. The reinsurer has the right to evaluate the risks which are involved in with the policy. It is the tricky policy build up for some specific criteria.
This reinsurance policy is beneficial for the reinsurers as it allows the company to create a customized policy which will meet the specific need of insurers and it will allow the lesser risk. Reinsurers have a chance to assess the individual risks.
It also allows the reinsurer to determine the rate for reinsurance which they think it is reasonable. Normally this reinsurance if highly specialized. It is offered by a small number of insurance companies.
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