The policyholder under a reinsurance contract. It is an insurance firm that partially or wholly transfers the risk it has underwritten to a reinsurer (reinsurance firm). It agrees to pay out a percentage of the original premium (collected under the original insurance contract).
Simply put, a ceding company/ cedent is an insurer that buys protection for the insurance risk it has assumed, by means of reinsurance, sharing the risk with another firm. Cedent is a term used in the insurance industry to imply an insurer seeking insurance from other providers.
Example: XYZ (an insurance firm) issues a policy for a fleet of aircrafts. The firm assesses it cannot single-handedly assume the entire risk of the policy, so it decides to transfer a portion of the risk to a reinsurance firm. XYZ is the cedent that aims to reduce its exposure to potential losses by passing its financial obligation for these losses to the reinsurer.
It is also known as a cedant or reinsured.
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