Question

In which of the following reinsurance contracts does the ceding insurer have the option to cede and the reinsurer have the option to accept a specific risk of a specific insured?

a.

Facultative

b.

Retrocession

c.

Treaty reinsurance

d.

Facultative obligatory treaty

Posted under IC85 Reinsurance Management

Answer: (a).Facultative Explanation:In facultative reinsurance, the ceding insurer has the option to cede and the reinsurer has the option to accept a specific risk of a specific insured. Treaty reinsurance consists of an agreement between the original insurer and the reinsurer whereby the reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement. Facultative obligatory treaty is a combination of facultative and treaty forms, where the ceding insurer may cede risks of any agreed class of insurance which the reinsurer must accept if ceded. Retrocession is a process where a reinsurance company reinsures another reinsurance company.

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Q. In which of the following reinsurance contracts does the ceding insurer have the option to cede and the reinsurer have the option to accept a specific risk of a specific insured?
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