Which two types are considered the basic forms of reinsurance?

The basic forms of reinsurance are indeed categorized into facultative and treaty reinsurance.

Facultative reinsurance pertains to a case-by-case arrangement where the reinsurer evaluates individual risks and determines whether to accept them. This type gives both the insurer and reinsurer flexibility to negotiate specific terms for each risk. It is particularly useful for unique or high-risk situations.

Treaty reinsurance, on the other hand, involves a broader agreement between the insurer and reinsurer. Under this arrangement, the reinsurer agrees to accept a range of risks over a specified period, without needing to assess each individual risk beforehand. This type is beneficial for insurers needing consistent coverage for multiple policies and allows for smoother operational workflow.

In summary, facultative and treaty reinsurance are foundational to the reinsurance industry, providing insurers with methods to manage risk effectively.