Facultative Reinsurance Solutions

What is Facultative Reinsurance?

Many insurers ask, “What is facultative reinsurance?” and “When is it needed?” It’s a type of reinsurance that allows individual risks to be placed outside of your treaty program. This gives you the flexibility to reinsure high-value or unique exposures on a case-by-case basis.

To understand how facultative works, think of it as a one-off transaction. Each risk is assessed on its own merits, with placement arranged directly with reinsurers. Oak Tree assists clients from initial structuring to reinsurer engagement and documentation. It’s ideal when speed and tailored terms are essential.

We often use proportional facultative reinsurance, where reinsurers share premiums and claims based on the percentage of risk they accept. This allows for tailored structuring while managing capital exposure and compliance.

Why You Need Facultative Reinsurance?

Facultative reinsurance allows insurers to transfer specific risks to a reinsurer on an individual basis. It operates outside of treaty structures and is negotiated separately for each case. This makes it suitable for risks that are large, unique, or exceed treaty capacity.

Situations Where Facultative Reinsurance is Appropriate:

• Risks with high sums insured that surpass treaty limits
• Non-standard or unusual risks not contemplated by existing treaties
• New business lines or products with limited experience
  One-off or complex risks requiring tailored terms

Common Applications Include:

• Property facultative reinsurance – for commercial buildings, industrial assets, and infrastructure
• Proportional facultative reinsurance – where risk, premium, and claims are shared in agreed proportions

By using facultative reinsurance in selected cases, insurers gain the flexibility to write larger or more complex risks while maintaining control over their portfolio.