Facultative Insurance

Facultative Insurance is a type of reinsurance arrangement in which an insurance company transfers a specific individual risk to a reinsurer for consideration. Unlike treaty reinsurance, each risk is evaluated and accepted separately by the reinsurer. It is generally used for large, unusual, or high-risk properties, businesses, or insurance policies that may exceed the insurer’s normal capacity. The reinsurer reviews the details of the risk and decides whether to accept or reject it, along with the terms, coverage, and premium. Facultative reinsurance helps insurance companies manage exceptional risks, protect their financial stability, and provide coverage for risks that require specialized underwriting.