facultative reinsurance

Facultative reinsurance is a type of insurance where a primary insurer (cedent) agrees to transfer specific risks or individual policies it underwrites to a reinsurance company. This process allows the primary insurer to limit its exposure on particular policies that might be too large or risky to retain alone. The reinsurance company then shares in the potential profits and losses associated with those specific policies. It is negotiated on a case-by-case basis, offering flexibility to handle unique or high-value risks, and providing the primary insurer with additional capacity and financial security.