In reinsurance, the insurer that seeks to transfer risk is called the

• A. Ceding company
• B. Reinsuring company
• C. Insured
• D. Broker

Answer: (A)

In reinsurance, the insurer that passes risk to another insurer is the ceding company. Reinsurance is essentially insurance for insurance companies, allowing the primary insurer to transfer part of its risk to a reinsurer in exchange for a premium. The ceding company issues the original policy and then cedes part of that risk—usually through a treaty or facultative arrangement—so the reinsurer will bear a portion of the potential losses. The reinsurer is the entity that accepts and assumes that risk, while the insured remains the policyholder who ultimately benefits from the coverage. A broker, meanwhile, is an intermediary who helps place the reinsurance arrangement but does not transfer or assume the risk itself.