Glossary term
Reinsurance Ceded
Reinsurance ceded is the portion of risk, premiums, or liabilities an insurer transfers to a reinsurer under a reinsurance contract.
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What Is Reinsurance Ceded?
Reinsurance ceded is the portion of insurance risk, premium, or liability that a primary insurer transfers to a reinsurer. The insurer transferring the risk is called the cedent or ceding company. The reinsurer accepts the ceded risk under the terms of the reinsurance agreement.
The term appears in insurer financial statements, statutory reporting, reinsurance contracts, and risk-management discussions. It helps show how much of the insurer's written business is retained and how much is shared or transferred to reinsurers.
Key Takeaways
- Reinsurance ceded is risk transferred from an insurer to a reinsurer.
- The ceding insurer remains responsible to policyholders unless the policy and law provide otherwise.
- Ceded reinsurance can reduce retained losses, stabilize results, and support capital management.
- Too much dependence on reinsurance can create counterparty and collectability risk.
How Ceded Reinsurance Works
An insurer may cede reinsurance through a treaty covering a book of business or through a facultative agreement covering a specific risk. The ceding company pays premium or shares premium with the reinsurer. In return, the reinsurer reimburses covered losses or assumes a defined share of risk according to the contract.
From an accounting and regulatory perspective, ceded reinsurance can affect reserves, surplus, loss ratios, and reported net exposure. Gross written premium shows business before reinsurance. Net written premium reflects the business retained after reinsurance ceded and assumed are considered.
Gross, Ceded, and Net
Term | Meaning | Why it matters |
|---|---|---|
Gross exposure | Total risk before reinsurance | Shows what the insurer originally wrote |
Reinsurance ceded | Risk transferred to reinsurers | Shows how much risk is shared or transferred |
Net exposure | Risk retained after reinsurance | Shows what the insurer keeps on its own books |
Reinsurance recoverable | Amounts due from reinsurers | Creates counterparty collectability risk |
What Analysts Watch
Reinsurance ceded can make an insurer more stable, but it is not automatically good or bad. Analysts look at why the risk was ceded, how much risk remains, who the reinsurers are, whether collateral is required, how recoverables are aging, and whether the insurer depends heavily on reinsurance to support growth or solvency.
The Bottom Line
Reinsurance ceded is the risk an insurer transfers to reinsurers. It can strengthen capacity and reduce volatility, but it also introduces reliance on the reinsurer's ability and willingness to pay when covered losses occur.