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Treaty reinsurance is a type of reinsurance where a re-insurer agrees to cover specific risks of the ceding company over a period of time.
It is a type of reinsurance contract where the reinsurer agrees to accept all or some portion of the risk of the primary insurer provided it meets specific criteria based on ceding company underwriting and issue requirements.
That is, treaty reinsurance covers all of the primary insurer’s policies in a given area that meets certain standards.
Facultative reinsurance is a form of reinsurance that is transacted on an individual basis, where the reinsurer and the insurer have the option to accept or reject individual risks.
This type of reinsurance is considered the oldest form of reinsurance and is typically used for specific risks that are not covered by standard policies.
The reinsurer has the freedom to accept or reject any risk offered, and the ceding firm has the option to select a specific risk.
Reinsurance is an insurance contract between two parties, the primary insurer and the reinsurer, whereby the reinsurer agrees to protect the insurer against part of its risk in return for the premium to be paid by the primary insurance.
In essence, reinsurance is insurance for insurance companies. It is not insurance for regular customers.
Reinsurance serves as a way for an insurance company to diversify its risk exposures by sharing it with another insurance company, called the re-insurer, which doesn’t have a direct relationship with the insured person or company.
Reinsurance helps insurance companies manage their risks by transferring a portion of the potential losses they face.
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