Question

What is the purpose of obtaining reinsurance coverage before accepting to insure a client in facultative reinsurance?

a.

To exceed the reinsurance terms applying to the direct insurance

b.

To back up the judgment of the original underwriter at the insurer's office

c.

To avoid the administrative costs of treaty reinsurance

d.

To obtain a better premium from the reinsurer

Posted under Forms of Reinsurance IC85 Reinsurance Management

Answer: (b).To back up the judgment of the original underwriter at the insurer's office Explanation:When reinsuring facultatively, the insurer obtains reinsurance coverage before accepting to insure a client to back up the judgment of the original underwriter at the insurer's office who will often benefit from the reinsurer's knowledge of a particular risk or class of risk.

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Q. What is the purpose of obtaining reinsurance coverage before accepting to insure a client in facultative reinsurance?
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