What type of reinsurance is evaluated on a case-by-case basis?

Facultative reinsurance is assessed on a case-by-case basis, which means that for each individual risk or policy, the primary insurer has the option to negotiate reinsurance terms specifically tailored to that risk. This approach allows insurers to selectively decide whether or not to cede risks for particular policies to reinsurers, taking into account the unique characteristics and complexities of each case.

In facultative reinsurance, the reinsurer reviews the policy details and the associated risks before agreeing to provide coverage. This contrasts with other types of reinsurance, such as mandatory or proportional reinsurance, where terms and conditions are generally established beforehand for whole classes of business rather than examined individually. The customization allowed in facultative reinsurance enables insurers to manage their risk exposure more effectively while ensuring that they obtain the necessary reinsurance support for high-value or particularly risky policies.