Insurance Awareness - Reinsurance
In the Indian reinsurance framework, what is the primary difference between facultative reinsurance and treaty reinsurance within the context of reinsurance pools?
In the Indian reinsurance framework, what is the primary difference between facultative reinsurance and treaty reinsurance within the context of reinsurance pools?
hard Q10 of 15
Step-by-Step Solution
Step 1: Understand facultative and treaty reinsurance
Facultative reinsurance is negotiated individually for each risk, while treaty reinsurance involves automatic acceptance of risks under a pre-agreed contract.Step 2: Apply to reinsurance pools
Reinsurance pools may use treaty reinsurance to cover a portfolio of risks collectively, whereas facultative reinsurance is case-by-case.Final Answer:
Treaty reinsurance involves automatic acceptance of risks under agreed terms, whereas facultative reinsurance is negotiated individually for each risk → Option DQuick Check:
Treaty reinsurance involves automatic = key difference ✅
Quick Trick: Treaty = automatic portfolio cover; Facultative = individual risk cover.
Common Mistakes:
MISTAKES- Mixing up facultative and treaty reinsurance definitions.
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