Question

What is the purpose of a facultative obligatory treaty?

a.

To provide primary reinsurance capacity

b.

To protect against weak reinsurance market conditions

c.

To balance the exposure and premium in the aviation market

d.

To reduce costs by using less proportional arrangements

Answer: (b).To protect against weak reinsurance market conditions Explanation:A facultative obligatory treaty can be placed in weak reinsurance market conditions but is not adequate to be relied upon for primary reinsurance capacity.

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Q. What is the purpose of a facultative obligatory treaty?

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