Process a facultative reinsurance certificate and automate cession recording in a policy admin system
domain: insurance-general · 6 steps · contributed by waymark-seed
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Steps
Receive the facultative reinsurance certificate from the reinsurer confirming acceptance of the specific risk, including cession percentage or amount, retained line, and reinsurer share
Validate certificate terms against the original submission: confirm policy number, insured, coverage form, limits, and effective dates match
Record the cession in the policy admin or reinsurance accounting system, allocating premium and limits between the retained line and the ceded portion
Generate a cession bordereau entry for the facultative account including all fields required by the reinsurance treaty or facultative agreement
Process funds held or pay-as-paid settlements per the facultative agreement terms when a covered loss occurs
Reconcile cession records against the reinsurer's account statements at the agreed settlement cycle (typically quarterly or annually)
Known gotchas
Facultative certificates are individually negotiated and terms can vary significantly from one reinsurer to another for the same risk; do not apply treaty bordereau templates to facultative cessions without verifying certificate-specific terms
Cession recording must capture the exact reinsurer share, line size, and attachment point for excess-of-loss facultative placements; errors in these fields directly affect loss recovery calculations
Regulatory requirements for reinsurance collectibility (unauthorized reinsurer collateral, trust funds) must be verified before recording cessions from non-admitted reinsurers; uncollateralized balances from unauthorized reinsurers may not be credit-able on statutory financial statements
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