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.
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