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Some times the insurance company accept to ensure a single risk that it's total some insured exceeding the total treaty capacity and issued the insurance policy prior the completion of the facultative reinsurance placing . Hence the presentation of the facultative reinsurance offer and request to reinsures to cover the surplus amount that exceeding the ceding company's treaty capacity appearing the commencing date of the risk prior to the date that the reinsurers receives the facultative offer, that to say that the ceding company has all ready being on risk before receiving the acceptance of the business by the reinsurers.
Therefore for reinsurance uderwriters to be in the safe side they puts this condition when they accept the business " Acceptance is subject to NO KNOWN OR REPORTED LOSS ." i.e The facultative reinsurers is only asked and responsible for the claims that occurring after their confirmation of the acceptance of the risk.
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