What is a Ceding Company
The company ceding the risk, i.e., getting the risk reinsured, and has already been discussed.
What is Cession?
Means the amount of risk ceded for reinsurance, i.e., the amount reinsured.
What is Retrocession?
Means reinsurance of reinsurance. A reinsurer may like to get his interest protected by further reinsurance and so on.
What is Retention?
This refers to the amount of risk retained by the ceding company. The balance is usually reinsured. The amount of retention is dependent on the financial strength of the ceding company for that class of business. It is the refined figure of another term known as LIMIT.
Normally “Limit1’ is a rough guide of the ceding company and depending on the quality and nature of the risk the ceding co. may decide to enhance or reduce the limit for the purpose of actual retention.
What is Line?
A line is equivalent to retention, i.e., the amount retained by the ceding co… A reinsurance arrangement is usually expressed in terms of “line” meaning that if a ceding company has a ten- line or twelve-line reinsurance arrangement (TREATY) it can automatically cede or reinsure up to ten times or twelve times of the amount retained.
Who is a Primary Insured / Assured?
This refers to the primary insured (assured) originally insuring the risk at the first instance. He is one of the parties to the insurance contractand not in the reinsurance contract.
What is Reciprocity?
This is a widely used term in the transaction of the business of reinsurance, indicating a situation involving the desire for the satisfaction of mutual interest.
Normally, the direct insurers, at one time or the other, do transact reinsurance business also in addition to the insurance business.