General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
When an insurer transfers part of its risk to another insurer through reinsurance, the insurer that transfers the risk is called the:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
The ceding company, also called the primary insurer, is the insurer that transfers or cedes part of its risk to another insurer through reinsurance. The reinsurer is the company that accepts the risk. Reinsurance lets an insurer write larger policies and absorb catastrophic losses by sharing the exposure, while the original policyholder's contract remains with the ceding insurer. The policyholder usually has no direct relationship with the reinsurer, which deals only with the ceding company under the reinsurance agreement.
Why the other options are wrong
- A) The reinsurer is the company that accepts the ceded risk, not the one transferring it. The reinsurer is the risk-taker that accepts the ceded exposure from the primary company.
- B) Recipient company is not the standard term. The ceding company is the transferor of the risk. Recipient company is not the standard label; the transferring insurer is the ceding company.
- D) A managing general agent is a producer with broad authority. It is not a party to the reinsurance arrangement. A managing general agent is a producer with broad underwriting and binding authority, not a reinsurance party.
Memory hook
Ceding = giving away risk upstairs. The ceding company hands risk to the reinsurer.