Reply To: Types of reinsurance
Vanshika Gupta
Facultative reinsurance means if several risks or contracts need reinsurance, they a renegotiated separately. The reinsurer holds all rights for accepting or denying a facultative reinsurance proposal.
Under proportional reinsurance, the reinsurer receives a prorated share of all policy premiums sold by the insurer. The reinsurer also reimburses the insurer for processing, business acquisition, and writing costs.
With non-proportional reinsurance, the reinsurer is liable if the insurer’s losses exceed a specified amount, known as retention limit. As a result, the reinsurer does not have a proportional share in the insurer’s premiums and losses. The retention limit is based on one type of risk or an entire risk category.
Excess-of-loss reinsurance is a type of non-proportional reinsurance.