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There are two types of reinsurance1/ treaty reinsurance and2/ facultative reinsurance , the underwriting capacity in this regard is concerning with treaty reinsurance and may be defined as the total amount the insurance company can bear and take each and every risk , however this amount in the treaty items and terms is called the TREATY LIMIT and usually this limit is determined by the insurance company in accordance to it's financial capabilities .
The facultative reinsurance is only operates and works when the insurance company is asked to ensure a risk or a number of risks that exceeding the treaty limit or exceeding it's underwriting capacity.
Thanking you , with my very best wishes.
