[Solved] Which of the following statements about facultative reinsurance is INCORRECT? — Ans: It involves automatic acceptance of all risks by the reinsurer | Insurance Awareness

Insurance Awareness - Reinsurance

Which of the following statements about facultative reinsurance is INCORRECT?

AIt allows reinsurers to reject risks they do not want to cover

BIt involves automatic acceptance of all risks by the reinsurer

CIt is generally used for risks that fall outside treaty agreements

DIt provides flexibility in managing large or unusual risks

Step-by-Step Solution

Step 1: Review facultative reinsurance characteristics
Facultative reinsurance is selective and does not involve automatic acceptance.
Final Answer:
It involves automatic acceptance of all risks by the reinsurer → Option B
Quick Check:
Involves automatic acceptance = NOT the correct feature ✅

Quick Trick: Remember facultative is selective, not automatic.

Common Mistakes:

MISTAKES

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