Facultative reassurance meaning

Facultative reassurance is the placement of reinsurance by a life insurer (the cedant) for a specific policy or defined risk, agreed individually with a reinsurer. It is used on a one‑off, risk‑by‑risk basis to transfer all or part of a large, unusual or sub‑standard exposure, rather than under a standing treaty. Key legal features include: the reinsurer underwrites and may decline the particular risk; cover is not automatic and attaches only when expressly accepted; terms, limits and premium are bespoke; and a separate contract of reassurance is formed between cedant and reinsurer. Depending on wording, the contract may (but need not) include “follow the fortunes” or “follow the settlements” provisions. Facultative placements are commonly used to manage capacity, concentration and solvency capital, or to access specialist underwriting. This is a descriptive market term, not defined in legislation or case law, and usage is broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland. In non‑life business it is more commonly called facultative reinsurance; in life assurance markets “reassurance” remains standard. Facultative reassurance is distinct from treaty reassurance, which provides automatic cover for classes or portfolios under pre‑agreed terms.