What is a key feature of facultative reinsurance agreements?

Facultative reinsurance agreements are characterized by the ability to assess and decide on coverage for individual risks. This means that the reinsurer can choose whether or not to accept a specific risk that is offered by the ceding insurer. This key feature provides flexibility, allowing the reinsurer to evaluate each risk on its own merits, potentially rejecting coverage for risks that do not meet their underwriting standards or appetites. This individualized approach contrasts with treaty reinsurance, which typically covers a portfolio of risks without the option to decline individual ones. The ability to reject coverage enhances the reinsurer's ability to manage their risk exposure effectively.