Ceding Company Law and Legal Definition

Ceding Company is an insurer, also called a primary insurer, that passes on to other insurers some part of its risk under insurance policies it has accepted through reinsurance. Reinsurance is an arrangement in which a company, the reinsurer, agrees to indemnify an insurance company, the ceding company, against all or a portion of the primary insurance risks underwritten by the ceding company under one or more insurance contracts.

Reinsurance allows insurers to increase the maximum amount they can insure for a given loss or category of losses, by enabling them to underwrite a greater number of risks, or larger risks, without burdening their need to cover their solvency margin, and hence their capital base.