Alberta General Insurance Level 1 Practice Exam

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What is Facultative Reinsurance characterized by?

Mass acceptance of risks
Risk evaluated on a case-by-case basis
Automatic risk transfer
A fixed percentage of all risks

The correct answer is: Risk evaluated on a case-by-case basis

Facultative Reinsurance is a type of reinsurance that involves risk evaluation on a case-by-case basis. This means that each risk is assessed individually and the terms of the reinsurance agreement are negotiated accordingly. This is different from Mass Reinsurance (option A) which involves accepting all risks without evaluation, Automatic Reinsurance (option C) which automatically transfers a predetermined set of risks, and Quota Share Reinsurance (option D) which involves a fixed percentage of all risks being ceded to the reinsurer. Therefore, Facultative Reinsurance is not characterized by mass acceptance, automatic risk transfer, or a fixed percentage of all risks.