Facultative Obligatory Coverage Clause Samples
The Facultative Obligatory Coverage clause defines the terms under which an insurer or reinsurer is required to accept certain risks from a ceding company, but only after reviewing and approving each risk individually. In practice, this means that while the ceding company can offer specific risks to the reinsurer, the reinsurer retains the right to assess each submission and decide whether to accept or decline coverage, rather than being automatically obligated to cover all risks. This clause provides flexibility for both parties, allowing the ceding company to seek additional coverage for particular risks while enabling the reinsurer to manage its exposure and underwriting standards, ultimately balancing risk allocation and operational control.
Facultative Obligatory Coverage. A. The CEDING COMPANY may cede and the REINSURER will accept reinsurance on a facultative obligatory basis the CEDING COMPANY's business as defined in Schedule A, if all of the following conditions are met for each life:
1. The risk is conventionally underwritten.
2. The plan is listed in Schedule A.
3. The policies are directly written by the CEDING COMPANY.
4. The sum of the amount of insurance inforce and applied for on that life, in all companies does not exceed $[ ].
5. The issuance and delivery of the policy is in compliance with the laws of all applicable jurisdictions and the CEDING COMPANY's corporate charter.
6. Automatic reinsurance coverage under this agreement has not been used on this policy.
Facultative Obligatory Coverage. 3 IV. Yearly Renewable Term Premiums ............................... 4 V.