Every answer and its explanation appears here once you have finished the path. Each one then links to the matching glossary entry, where the concept is set out in full with its worked example.
1. People often say facultative cession serves insurers that have no treaty. The module argues the opposite. Why?
Because a treaty is defined BEFORE the business is known: so there are always risks that exceed its capacity, fall within an exclusion, or that one would rather not put into a shared account
A treaty is a subscription contract whose object is a definition, written before the business exists, and that precedence is what manufactures the cases facultative handles. An insurer with no treaty has no gap to plug, it has a general need. The three other answers look for the cause in the parties rather than the mechanism. The one on market relationships describes a real difficulty for a young company, and does not explain why the others use it. The one making a treaty a condition of access invents a rule. The one on the size of risks has it backwards: an insurer without treaty capacity is precisely the one for whom an average risk becomes large.
Glossary entry · reassurance-facultative2. A risk fits within the treaty's capacity and its scope, and the cedant places it facultatively anyway. What reason can justify that?
Account management: a treaty renews on its result, and an exceptional loss lodged inside it will weigh on the commission, on the rate, sometimes on the availability of the capacity itself
Taking a risk out through a facultative amounts to buying dedicated protection so that it does not enter an account shared with the rest of the portfolio, and the calculation is not always favorable: it is made risk by risk. The answer on speed reverses the timings, a facultative placement being counted in days where a treaty cession is automatic. The one on confidentiality attributes to the cedant an intention that treaties frame with disclosure duties, and that would be badly received. The one on compliance invents a requirement: a risk ceded to the treaty appears in the treaty's returns, which is precisely their purpose.
Glossary entry · reassurance-traite3. An underwriter receives a large piece of business and immediately calls a facultative reinsurer. What does that order cost?
It pays twice for capacity it already had: the step is to read its own treaty first, then place only what is left to place
The order of work arises on every piece of business and is always the same: does the treaty take it, and if so the cession happens by itself. Reversing that order buys protection already held. The answer on losing automaticity invents a forfeiture; a treaty takes what its scope describes, regardless of the cedant's approaches. The one on double cover applies direct insurance reasoning to a reinsurance structure, where the cedant simply decides what to offer to whom. The one on prior consent of treaty reinsurers invents an authority the treaty does not give them over what falls outside its scope.
Glossary entry · wording-de-traite4. A risk falls within a named treaty exclusion. An underwriter computes the remaining capacity and looks to place the excess. Where is the mistake, and what must be checked next?
The treaty does not see this risk: it takes neither a share nor a euro of it, so there is no excess but a wholly bare risk. It remains to check that the exclusion does not close on the share it would keep for its own account either
Reasoning on available capacity assumes the treaty sees the risk, and a named exclusion means it does not see it at all: the question changes, and the timetable with it. The check that follows is the one people forget, because it bears on the share retained: keeping twenty million on a risk the treaty refuses means carrying alone an exposure the reinsurance plan never contemplated. The answer on a discount invents an intermediate mechanism. The one on a waiver confuses an exclusion, which is a boundary of scope, with a limit the lead could lift. The one making it case by case acceptance describes facultative obligatory, which is something else.
Glossary entry · retention-conservation5. A broker expects a firm answer within eight days on a risk that can only go facultative. What should the underwriter say today?
What he can confirm and what stays conditional: a facultative placement is counted in days, and he can firmly offer only what he is prepared to keep net if the facultative fails
The line the underwriter controls is the one he would keep alone, and it is the only one he can firmly state; the rest depends on a market that will answer when it answers. The answer confirming everything bets on a placement, which amounts to carrying the risk without having decided to. The one saying nothing treats silence as prudence, when it leaves the broker believing an answer is possible and costs them the days they have to look elsewhere. The one on a condition precedent describes a practice that exists and does not remove the need to say what is held: a placement condition accepted by a client in a hurry is argued badly on the day it operates.
Glossary entry · traite-facultative