Reinsurance Ceded
What Does Reinsurance Ceded Mean?
Reinsurance ceded occurs when an insurance company, known as the ceding company, transfers certain risks from a policy to another company, called the reinsurer. The ceding company pays a premium to the reinsurer, and in return, the reinsurer is responsible for paying any claims associated with the ceded risks.
Insuranceopedia Explains Reinsurance Ceded
Ceding insurance risks to another company helps an insurer reduce its financial exposure, as some claims will now be paid by the reinsurer.
One form of ceding is facultative reinsurance, where the ceding company transfers the risk of an individual policy to another insurer. This often occurs when a specific risk isn’t covered by the original policy, and transferring it to another company is necessary for the policy to be fulfilled.
The other form is treaty reinsurance, in which the reinsurer agrees to cover certain types of risks or a group of risks across all of the ceding company’s insurance policies.
