Question

What is the advantage of Treaty reinsurance over Facultative reinsurance in terms of administrative costs?

a.

Treaty reinsurance involves higher administrative costs than Facultative reinsurance.

b.

Treaty reinsurance involves lower administrative costs than Facultative reinsurance.

c.

Both Treaty and Facultative reinsurance involve similar administrative costs.

d.

None of the above.

Posted under IC85 Reinsurance Management

Answer: (b).Treaty reinsurance involves lower administrative costs than Facultative reinsurance. Explanation:Since treaty reinsurance provides automatic cover, the insurer is guaranteed a definite amount of reinsurance protection on every risk which he accepts. The administrative costs are therefore much lower than those applying to facultative reinsurance.

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Q. What is the advantage of Treaty reinsurance over Facultative reinsurance in terms of administrative costs?
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