Ceded Reinsurance Definition & Meaning | Insurance Term | CSIMarket
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Glossary

Ceded Reinsurance

Insurance Term

Ceded reinsurance refers to the transfer of some or all of the risk of insurance policies from one insurance company (the cedent) to another insurance company (the reinsurer). The cedent pays the reinsurer a premium in exchange for assuming the risk associated with the policies it cedes.

In the insurance industry, ceded reinsurance is commonly used to manage risks and protect the financial stability of insurance companies. By transferring some of the risk of their policies to reinsurers, insurance companies can reduce their exposure to catastrophic losses, ensure they have sufficient capital to cover potential claims, and obtain better diversification for their portfolios.

Ceded reinsurance can be proportional or non-proportional. In a proportional arrangement, the cedent and reinsurer share the risk of the policies and the premium received in proportion to their agreed-upon percentages. In a non-proportional arrangement, the reinsurer assumes the risk of the policies only after the cedent*s losses have exceeded a certain amount (known as the retention).

Overall, ceded reinsurance is a critical tool for managing risk in the insurance industry, enabling companies to protect their assets and continue providing coverage to customers in the event of significant losses.


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