Question

For what purposes is Facultative Obligatory Treaty used?

a.

To arrange automatic additional capacity for surplus after exhausting existing automatic arrangements for reinsurance cessions.

b.

To facilitate writing of high value exposures or to deal with high accumulation.

c.

Where net retention is lowered on account of the degree of hazard this would back up the additional capacity as required.

d.

All of the above.

Posted under IC85 Reinsurance Management

Answer: (d).All of the above. Explanation:Facultative Obligatory Treaty is used to arrange automatic additional capacity for surplus after exhausting existing automatic arrangements for reinsurance cessions, to facilitate writing of high value exposures or to deal with high accumulation, and where net retention is lowered on account of the degree of hazard this would back up the additional capacity as required.

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