What is facultative reinsurance?

Facultative reinsurance is optional on both sides. The cedent or broker offers a named risk. The reinsurer looks, or does not. There is no automatic cession. Capacity, if it exists, exists because someone read a file and wrote a line. That is the legal idea. The operating system is the pack: slip, schedule, loss history, wording excerpts, then a certificate if someone actually writes.

Speed without a complete file is a faster wrong quote. Facultative is used when a risk is too large, too odd, or outside the treaty class. It may sit above a retention, beside a treaty, or as a whole-account cover on a single insured. It is still one insured, one period, one interest, one set of limits.

How it works

The sequence is ordinary and easy to skip. Assemble a pack until an underwriter can price without guessing, or send a chase list that names what is still missing. Offer the same file version to markets that have appetite. Collect written lines on those terms, or written declines. Issue or request the certificate that matches the written slip, not the covering email that moved a deductible later. Stop treating the zip as placed until the certificate exists, or until the written line is the evidence your claims desk will accept.

The slip is the placing instrument. In London it may be an MRC. The schedule of values is not the slip. They should agree on TIV and on the location list. They often do not. The pack shows both spans. It does not average. It does not hide the extra warehouse.

Underwriting guidance still belongs to the reinsurer: class, occupancy, territory, construction, accumulation. Software can extract occupancy from the slip with a span. Software should not auto-bind a share because the occupancy string looked familiar. Facultative is optional. Optional means a human.

Worked example

The fictional walkthrough on this site is ACME Construction Ltd, acme.example, property facultative. Slip page 1 names the insured and the period 1 January 2026 to 31 December 2026. Slip page 2 states USD 10,000,000 any one occurrence and TIV USD 42,000,000. The SOV totals USD 47,100,000 because a warehouse was added after the slip was typed. The hours clause is absent. The SOV has no as-at date.

That pack has a traced limit, a TIV conflict, and two chase items. It is sendable only if you want the market to price a fight. Usually you resolve whether the warehouse is on cover, and you chase the hours clause and the as-at, before you ask for a line.

What goes wrong

Two markets see two versions of the zip because a late email added a page. The slip uses a legal name and the schedule uses a trading style. The loss run has no as-at date. Unsigned slips are presented as written. The certificate later prints a different share than the line. Skipping the pack is how you burn a market. Skipping the certificate is how the claim meets a different limit than the quote.

Related reading

The topic hub is facultative reinsurance. Automatic capacity is treaty reinsurance. The document list is how to build a facultative submission pack. The sample file is the pack inspector.