Business, Legal & Accounting Glossary
A cedent is a party who passes the duty for reimbursing certain risks to another party. In the context of insurance, the cedent is the party that pays a premium to an insurance company in exchange for insurance coverage.
The term “cedent” is used most often in the reinsurance business. They are the insurance companies that hand over their risks to the reinsurers.
For instance, if a life insurance company cedes risk worth $5 million to a reinsurance firm in exchange for premium payments, the life insurance company is the cedent.
In an insurance contract, a cedent is a person who transfers financial responsibility for certain possible losses to the insurer. The cedent pays an insurance premium in exchange for taking on a specific risk of loss. Although the term cedent is most frequently used in the reinsurance industry, it can refer to any insured party.
Insurance companies are susceptible to unanticipated losses as a result of their disproportionate exposure to high-risk organisations. A reinsurer offers the cedent company numerous liability reductions and protection against large losses. The transfer of all or a portion of the risks to the reinsurance firm enables the cedent business to keep its solvency margin while increasing underwriting capacity through cost savings, etc.
Insurance firms are controlled in such a way that they are prohibited from writing policies that exceed a specified percentage of their collateral. However, insurance companies are not required to keep collateral against reinsured policies.
In order to manage their operations more efficiently, most insurance companies surrender some of their risks to a reinsurance programme.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Cedent are sourced/syndicated and enhanced from:
This glossary post was last updated: 20th January, 2022 | 10 Views.