Reinsurance Ceded

See: Reinsurance.

If someone wrote a collection of poetry exploring the deep philosophical, moral, and emotional nuances of the insurance business, we feel that Reinsurance, Ceded would make a great title. If you're that kind of poet, go ahead and use it. Don't even bother to cite us. We just want to see it written.

Otherwise, it's just a run-of-the-mill insurance term. The insurance business is filled with obscure-sounding jargon that really refer to rather mundane concepts. Like...you don’t just send the insurance company a monthly payment; you send them a premium. Fancy.

The phrase "reinsurance ceded" is like that...a relatively simple concept with a fancy name.

Insurance companies often get a little squeamish about the amount of risk they take on. When this happens, they turn to insurance companies of their own, i.e. insurance for insurance firms. This business is called "reinsurance." The amount of risk passed on to the reinsurance firm is known as "reinsurance ceded." The original insurance company (known as the ceding company) hands over a portion of its risk. In other words, the risk is ceded to the second company.

You run Cover Me Gently Mutual, an insurance company that just wrote a $2 million policy to cover some guy's balloon trip around the world. You decide to lower your risk by getting some reinsurance. So you enter into a contract whereby a reinsurer takes over $500,000 of that liability.

That $500,000 counts as the reinsurance ceded for that deal.