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What is the difference between facultative and treaty reinsurance?
Wiki User
∙ 9y ago
With Facilitative Reinsurance, individual risks are offered by a ceding insurer for acceptance or rejection by the reinsurer. With Treaty Reinsurance, the reinsurer and ceding (or offering) insurer have agreed that a specified portion of the type or category of risk as specified in the reinsurance treaty will be ceded (or offered) by the insurer and accepted by the reinsurer. Fac covers an individual risk, treaty covers a group of risks.
Wiki User
∙ 9y ago
Wiki User
∙ 14y agoSimply put, treaty reinsurance covers a set of subject policies, for a specified period of time. An example of this would be "all homeowner policies". This is more obligatory because all the terms of the contract between the primary insurer and the reinsurer must be met. The primary insurer must cede the business and the reinsurer is obliged to assume the business (under the contract stipulations) This is more popular when a large number of homogeneous risks are being insured. On the otherhand, facultative insurance covers only one underlying insured, and is written one account at a time. The reinsurer retains the "faculty" or the ability to accept or reject a risk that is offered. Facultative is more commonly used on larger or unusual risks, for example an oil tanker. Also differently than treat, fac reinsurance is non obligatory, meaning the he primary insurer doesn't have to cede the business and the reinsurer is not obliged to accept the risk.
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Which is more costly treaty or facultative?
Treaty reinsurance is costlier as it deals with the entire risks involved in the contract between the insurerReinsurance comapny) and insured(primary insurer) whereas facultative reinsurance deals with individual risks involved.
What is reinsurance?
Reinsuring is the act of purchasing a reinsurance agreement. Reinsurance is purchased by an insurance company who wishes to transfer part of the risk of loss from an issued policy or group of policies to another insurance carrier. This is done when the limit of insurance for a particular policy would exceed the capacity of an insurance carrier or a carrier needs reinsurance to increase the policy holder surplus required to maintain a sound financial position. Their are two types of reinsurance, treaty reinsurance and facultative reinsurance. Treaty reinsurance is arranged usually in advance, for a group of policies meeting certain criteria. For example, a treaty reinsurance policy may cover $250,000 of property losses excess of $250,000 for all commercial building properties in a given state. This is called excess of loss treaty reinsurance. This would be used to address capacity issues that occur frequently. Another type of treaty reinsurance is pro-rata reinsurance or share reinsurance. In pro-rata reinsurance, the reinsurer agrees to pay a percentage of all losses on the agreed upon policies. For example, a pro-rata treaty reinsurance policy may pay 50% of all losses of a group of policies. The premium for this type of reinsurance would be 50% of the earned premium for each of the policies covered minus a deduction for policy expense (underwriting and compensation to the agent). This type of treaty reinsurance is used to address a policyholder surplus need of the ceding insurer. Facultative reinsurance is issued for one policy, not a group of policies, and is usually used to address large line capacity, especially in property coverage. Facultative is usually written on an excess of loss basis. For example, an insurance company may have secured treaty reinsurance to write properties of a certain type up to $150 million loss limit, but the insured is requesting $250 million. To write the insurance policy, the insurance company must secure facultative reinsurance in the amount of $100 million excess $150 million. This may be abrivated $100 million xs $150 million. Mark Walters, ARM AAI West Insurance Group mwalters@westagy.com
What was the Reinsurance Treaty?
The Reinsurance treaty was a treaty made in 1887 (Prior to WWI) between Russia and Germany stating that if either country were declared war upon the other country would remain neutral.
What is the opposite of facultative?
Obligate is the opposite of facultative in biology. Treaty is the opposite of facultative in insurance.
Why did Germany let the reinsurance treaty end?
The reinsurance treaty, simply put, was a secret nonagression pact between Russia and Germany. Germany did not reinstate the treaty because of her complicated web of alliances; specifically, the dual alliance between Germany and Austria-Hungary.
What is faculative reinsurance?
A policy where the original (principal) insurer determines the level of risk it should maintian on any one policy, while the principal insurer will ask to share the remaining risk with a third party insurer for a premium. facultative reinsurance is taken for in dividual risks. if any risk is beyond direct insurers limit and does not fall under any treaty arrangements he made then the direct insurer approaches for the facultative support Suman Karthik
What is surplus reinsurance treaty?
the treaty where cedding company is willing to retain the amount to re insurer on anty one life assured
Difference between risk sharing and risk transfer in insurance in insurance?
Risk Sharing is used in coinsurance specifically where the risk is to be shared and not transferred among several insurance companies each one them having a direct contractual relationship with the insured for the portion of the risk accepted by that company.and transferring the risk is used in reinsurance , and reinsurance always involves legal entities and not individualsin reinsurance the contractual relationship is between the cedant and the reinsurer , only in special situations does the reinsurance treaty have a provision called the cut through clause that allows the insured to have a direct legal claim to the reinsurer for example , in the case the insurer becomes insolventHope all is in orderRegards,Tamer Hadddin
What is the difference between a treaty and the Indian Act?
None- The Indian Act is a type of treaty
What is meant by quota share treaty reinsurance?
Quota Share reinsurance is a type of pro rata reinsurance in which the primary insurer and the reinsurer share the amounts of insurance, policy premiums and losses (including loss adjustment expenses) using a fixed percentage. Quota Share reinsurance can be used for both property and liability insurance but is more frequently used in property insurance.
What is the difference between executive agreement and the treaty?
The executive agreement is like setting the rules for the treaty.
What is the difference between the declaration and the Treaty of Paris?
The Declaration of Independence showed what the patriots wanted, and the Treaty of Paris made the dream real.
