What Does Obligatory Treaty Mean?

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What does Obligatory Treaty mean? Read on to discover the definition & meaning of the term Obligatory Treaty - to help you better understand the language used in insurance policies.

Obligatory Treaty

Obligatory Treaty

A reinsurance treaty between an insurer and a reinsurer (usually involving pro rata reinsurance), in which the insurer agrees to automatically cede all business that falls within the terms of the treaty. The reinsurer, in turn, is obligated to accept such business. "Automatic Treaty" is another term for obligatory treaty.

We hope the you have a better understanding of the meaning of Obligatory Treaty.

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