The when, how, who, and why an insurance company will choose to purchase reinsurance depends on the ceding insurer, the book of business, the economic climate, and myriad other factors.
An insurance company may wish to purchase reinsurance for a specific insurance policy written for a specific complex or unusual risk of a specific policyholder. That kind of reinsurance is typically called facultative reinsurance. An insurance company may wish to purchase reinsurance for a portfolio of its insurance policies—say all its professional liability policies written during a specific policy year. That kind of reinsurance is typically called treaty reinsurance.Click below to view full article.