[Solved] What is the primary characteristic of facultative reinsurance? — Ans: Reinsurer has the option to accept or reject individual risks | Insurance Awareness

Insurance Awareness - Reinsurance

What is the primary characteristic of facultative reinsurance?

AReinsurer accepts all risks automatically under a treaty

BIt is mandatory for all insurance companies in India

CIt covers only life insurance policies

DReinsurer has the option to accept or reject individual risks

Step-by-Step Solution

Step 1: Identify the key feature of facultative reinsurance
Facultative reinsurance involves the reinsurer evaluating each individual risk and deciding whether to accept or reject it.
Final Answer:
Reinsurer has the option to accept or reject individual risks → Option D
Quick Check:
Reinsurer has the option = definition ✅

Quick Trick: Facultative = Flexible acceptance of individual risks.

Common Mistakes:

MISTAKES

Confusing facultative with treaty reinsurance which involves automatic acceptance.

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What is the primary characteristic of facultative reinsurance?