Treaty & Facultative Reinsurance
Reinsurance is typically obtained by insurers to cover their insurance obligations under either primary or excess policies. It is insurance for insurance companies. Reinsurance allows an insurance company to manage its risk and redistribute it when necessary. Reinsurance agreements are either treaty or facultative agreements.
Treaty reinsurance agreements are contracts between the primary insurer and a reinsurer where the reinsurer agrees to underwrite reinsurance for a certain class or multiple classes of business risks. The reinsurance will automatically be in place for the primary insurer when they issue a policy to an insured operating in those specified classes of business.
To the contract, a facultative reinsurance agreement is insurance obtained to cover either a single risk or a specific type of exposure. Each risk is individually underwritten. For example, if a particular insured needs insurance coverage for property values requiring limits in excess of the insurance the primary underwriter can assume, that underwriter will go out and obtain reinsurance for that risk. If the primary obtains the necessary reinsurance, the primary policy can be issued for that property.
Our attorneys have worked with insurers on both sides of the equation enforcing the obligations of reinsurers or pursuing the rights of a reinsurer against a ceding insurer where coverage is sought outside of the underlying agreement.