A Cession

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A Cession Cession refers to the portion of insurance policies or portfolio which are transferred to a reinsurer. This allows the ceding company to reduce its exposure, so that risk is distributed among two or more companies instead of falling upon a single insurer. Transferring risk to a reinsurer can take place in two ways proportional or non-proportional; -Proportional reinsurance is an arrangement where the insurer and reinsurer share a percentage of the premiums and losses. -Non-proportional reinsurance only requires payment from the reinsurer if losses are above an agreed-upon amount. Currently, the insurance industry has become more complex due to high competition among the insurance companies. In this regard, reinsurance provides an opportunity for both the insurer and reinsurer to share benefits and losses based on the accurate actuarial calculations that determine the loss or risk incurred. The primary insurer essentially sub-contracts portions of responsibility for the coverage and remains the point of contact for the client. Cession Beneficial to Insurance Companies in that the insurance company is able to manage its risk exposure better by ceding a portion of its risk to a reinsurer. Also, the insurance company benefits from the expertise of the reinsurer, the opportunity for arbitrage, and the ability to offer higher protection limits, as well as absorb larger losses. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful

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