[F008]

facultative reinsurance

Reinsurance effected item by item and accepted or declined by the reinsuring company after scrutiny, as opposed to reinsurance effected by treaty. The word facultative connotes that both the primary insurer and the reinsurer have the faculty or option of accepting or rejecting the individual submission, as distinguished from the preset obligation to cede and accept already agreed upon by the parties in treaty reinsurance.