What is the term for the transfer of risk from one insurer to a reinsurer?

The term for the transfer of risk from one insurer to a reinsurer is "cede." This process is known as cession, and it occurs when an insurance company (the ceding insurer) transfers a portion of its risk associated with certain policies to another insurance company (the reinsurer). This arrangement allows insurers to manage their risk exposure, stabilize their financial standing, and increase their capacity to underwrite more policies.

The use of reinsurance through cession enables primary insurers to protect themselves from large losses, improves their capital management, and can enhance their underwriting capabilities. Essentially, it allows them to share the risks associated with insurance policies, thus mitigating the financial burden that large claims can impose.

Understanding ceding is crucial for professionals in the insurance industry, as it is a fundamental aspect of risk management and financial stability within the sector.