Cedent / ceding company
The cedent, also called the ceding company, is the insurer that transfers (or 'cedes') part of its risk to a reinsurer in exchange for a share of the premium.
When an insurer buys reinsurance, it hands over a portion of the risk it has assumed from its policyholders. The company doing the ceding is the cedent, and the company accepting the risk is the reinsurer. The cedent keeps the share of risk it is comfortable holding, known as its retention, and cedes the rest.
An important point is that the cedent remains legally responsible to its own policyholders. If a covered claim occurs, the cedent pays the insured and then collects the reinsurer's share under the reinsurance contract. In most cases the policyholder has no direct relationship with the reinsurer and may not even know reinsurance is in place.
For example, a regional insurer acting as the cedent might cede 40 percent of its homeowners book to a reinsurer under a quota share treaty, sharing both premium and losses in that proportion. Knowing who the cedent is helps clarify the flow of premium and losses and who bears the ultimate obligations in a reinsurance program.
As a source of reinsurance capacity, RiskCube Re sits on the assuming side of these arrangements, working with cedents that underwrite emerging and complex risks.
Related Terms
Definitions are educational and general, and specific contracts, endorsements, and state rules may modify them. For regulatory guidance, refer to the NAIC or the Insurance Information Institute.