Facultative reinsurance is commonly purchased for large, unusual or catastrophic risks. Reinsurers thus must have the necessary resources to underwrite individual risks carefully. Other uses of facultative reinsurance include
-    When an insurer is offered a risk that exceeds its standard underwriting or reinsurance limits for that class, facultative reinsurance can permit the ceding company to accept the risk.
-    Insurers can fill gaps in coverage caused by reinsurance treaty exclusions by seeking separate facultative coverage for a specific policy or group of policies.
-    A reinsurer can issue facultative reinsurance to participate in a market in the short term to minimize risk and take advantage of favorable rates.
-    A treaty reinsurer may purchase facultative reinsurance to protect itself and its treaty reinsurers.
Treaty reinsurance, the most common form of reinsurance, covers some portion of defined class of an insurance company's business.