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    Question

    What is the primary purpose of facultative reinsurance?

    A To cover individual, often large, risks that fall outside of a treaty agreement. Correct Answer Incorrect Answer
    B To cover all risks within a specific class of business Correct Answer Incorrect Answer
    C To protect against catastrophic losses across the entire portfolio Correct Answer Incorrect Answer
    D To provide automatic coverage for all risks Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Facultative reinsurance is used to cover individual risks, often those that are large or unusual, on a case-by-case basis. It is not part of a pre-arranged treaty between the insurer and the reinsurer.

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