Which term describes the insurer that cedes risk in a reinsurance transaction?

Which term describes the insurer that cedes risk in a reinsurance transaction?

• A. Reinsurer
• B. Ceding Insurer
• C. Policyholder
• D. Broker

Answer: (B)

In reinsurance, the party that transfers part of its risk to another insurer is the ceding insurer (also called the cedant). This entity remains the insurer of record to the policyholder and ultimately handles claims, but it shifts some of that risk to a reinsurer to gain additional capacity and protection against large losses. The reinsurer is the company that accepts the risk from the ceding insurer. The policyholder is the insured person, not involved in the transfer of risk between insurers. A broker is simply an intermediary who helps place coverage between the insured and the insurer, not the party transferring risk.

In reinsurance, the party that transfers part of its risk to another insurer is the ceding insurer (also called the cedant). This entity remains the insurer of record to the policyholder and ultimately handles claims, but it shifts some of that risk to a reinsurer to gain additional capacity and protection against large losses. The reinsurer is the company that accepts the risk from the ceding insurer.

The policyholder is the insured person, not involved in the transfer of risk between insurers. A broker is simply an intermediary who helps place coverage between the insured and the insurer, not the party transferring risk.