Casualty Actuarial Society (CAS) Practice Exam

The key aspect of managing costs related to facultative reinsurance is that efficient processes can significantly reduce administrative costs. In facultative reinsurance, where the reinsurance for each individual risk is negotiated separately, having streamlined and efficient processes in place can lead to quicker negotiations, reduced overhead, and effective communication between the parties involved. This efficiency helps in minimizing costs associated with time delays and labor-intensive administrative tasks, ultimately leading to a more cost-effective arrangement.

Efficient processes can involve the use of technology to automate data submission and facilitate faster decision-making, which further supports cost management strategies. The goal in managing facultative reinsurance is not only to secure favorable terms but also to do so in a way that minimizes operational expenses, making this choice the most relevant to the context of cost management in facultative reinsurance.