Insurance Awareness - Reinsurance
Which of the following is a key difference between facultative and treaty reinsurance?
Which of the following is a key difference between facultative and treaty reinsurance?
medium Q7 of 15
Step-by-Step Solution
Step 1: Understand facultative vs treaty
Facultative reinsurance is arranged for individual risks, while treaty reinsurance covers a portfolio automatically.Step 2: Evaluate options
Option B correctly states the difference: facultative reinsurance is arranged individually; treaty covers an entire portfolio automatically. Options A and C reverse the definitions, and D is false.Final Answer:
Facultative reinsurance is arranged individually; treaty covers an entire portfolio automatically → Option BQuick Check:
[Facultative vs Treaty] = [Individual vs Automatic portfolio] ✅
Quick Trick: Facultative = Fine-tuned; Treaty = Total portfolio.
Common Mistakes:
MISTAKES- Mixing up facultative and treaty characteristics.
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