General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
In a reinsurance arrangement, the primary insurer that transfers part of its risk to a reinsurer is called the:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
The insurer that buys reinsurance is the ceding company because it cedes (transfers) a portion of its exposure to a reinsurer. The reinsurer indemnifies the ceding company for the ceded losses in exchange for a share of the premium. Reinsurance helps insurers handle large exposures, stabilize results over time, and increase capacity to write business without exceeding regulatory limits. The policyholder's contract remains with the ceding company, which remains fully responsible for paying claims under its policies.
Why the other options are wrong
- A) The reinsurer is the company that accepts the ceded risk, not the one transferring it.
- B) An assignee receives rights through assignment of a contract, which is not the reinsurance relationship.
- D) A co-insured shares coverage on a policy; the ceding company/reinsurer is a risk-transfer relationship between insurers.
Memory hook
Ceding = handing off. The ceding company hands risk to the reinsurer.