Legal & Regulatory
Ceded Reinsurance
Ceded reinsurance represents the insurance coverage and associated premiums that a primary insurer passes (cedes) to its reinsurers, reducing the insurer's net retained risk.
Last reviewed: May 2026 · Editorial methodology
Definition
Ceded reinsurance refers to the risk, premium, and potential loss liability that a primary insurance company (the cedent) transfers to a reinsurer under the terms of a reinsurance agreement. When an insurer cedes business, it transfers both a share of the premiums it collected from policyholders and a corresponding share of the liability for claims; in exchange, the reinsurer will reimburse the cedent for the ceded portion of any claims that occur. From an accounting perspective, ceded premiums reduce the insurer's reported gross written premiums to net written premiums (after reinsurance), and ceded losses reduce gross losses to net losses. The amount of reinsurance credit an insurer can take on its statutory balance sheet is subject to NAIC collateral requirements: reinsurers that are not licensed in the cedent's state of domicile may be required to post letters of credit or trust funds as collateral. Heavy reliance on ceded reinsurance can be a warning sign in insurer financial analysis—if reinsurers fail to pay (reinsurer insolvency, coverage disputes), the cedent remains fully liable to policyholders. The ratio of ceded premiums to gross premiums is a key metric in financial examinations; cedence ratios above 50%–75% may indicate capital inadequacy or excessive risk transfer concerns.
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Cover Forge USA Editorial Team
Editorial Lead
This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.
Reviewed 2026-06-14
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