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Which of the following is TRUE regarding the premium in facultative reinsurance?

medium Q8 of 15
Insurance Awareness - Reinsurance
Which of the following is TRUE regarding the premium in facultative reinsurance?
APremium is negotiated individually for each risk based on its characteristics
BPremium is fixed and uniform for all risks ceded facultatively
CPremium is not charged in facultative reinsurance
DPremium is always lower than treaty reinsurance
Step-by-Step Solution

  1. Step 1: Understand premium determination in facultative reinsurance

    Since risks are evaluated individually, premiums are negotiated based on risk specifics.

  2. Final Answer:

    Premium is negotiated individually for each risk based on its characteristics → Option A

  3. Quick Check:

    Premium is negotiated individually = correct choice ✅
Quick Trick: Facultative premiums vary per risk.
Common Mistakes:
MISTAKES
  • Assuming uniform or no premium in facultative reinsurance.
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