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Facultative means optional , in the facultative reinsurance both ceding company and reinsurance company or reinsurers are not obliged to cede and accept respectively , in other words the ceding company is not obliged to cede the business and the reinsurance company or reinsurers are not obliged to accept.
In reinsurance practice the ceding company usually cede to reinsurance company only the amount which exceeding it's treaty capacity or when there is no treaty , and the reinsurance company or reinsurers have their own choice to accept the business or decline.
Unlike treaty reinsurance where both ceding company and reinsurance company or reinsurers are obliged to cede business and accept business respectively , in other words the ceding company are obliged to cede any business to the treaty reinsurers and the reinsurance company or reinsurers are obliged to accept.
However you may need to use facultative reinsurance in the following situations :-
1/ Beyond treaty capacity.
2/When no treaty facilities are available .
3/ For marketing and administration policy and targets.
I hope this will meet your requirement .and would like to draw your kind attention to the point that the abbreviation TOBA seems unfamiliar to me , please explain.
Thanking you with my best wishes.
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