To cede means the ceding insurer passes risk to another insurer under a reinsurance agreement.
Why ceding happens
Ceding helps balance capital, diversify portfolio risk, and stabilize earnings after volatile claims seasons.
Contract mechanics
The ceding contract defines:
- What is covered.
- Attachment point and limit levels.
- Profit-sharing or ceding commissions.
Claims flow
When a covered loss occurs, primary and reinsurer responsibilities depend on treaty terms and settlement order.
Practical example
If a primary insurer writes multiple large commercial risks in one season, it may cede a quota share layer to protect against aggregate concentration.