General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
When an insurer transfers part of its risk to another insurer through reinsurance, the insurer transferring the risk is called the:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The ceding, or primary, company is the insurer that transfers a portion of its risk to a reinsurer. Reinsurance does not change the policyholder's contract — the ceding company remains directly liable to its insured — but it protects the ceding company's capacity and solvency by spreading large or catastrophic exposures across another carrier's balance sheet.
Why the other options are wrong
- B) A retrocessionaire is a reinsurer that accepts risk from another reinsurer, not the original insurer.
- C) The reinsurer assumes risk from the ceding company, but it pays the ceding company, not the original policyholder directly.
- D) Reinsurance is not surplus lines placement; surplus lines concerns placement with nonadmitted insurers.
Memory hook
Ceding company = the insurer that hands part of its risk upstairs. The policyholder still deals with the ceder.