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Cession

What Does Cession Mean?

Cession is the allocation of risks given to the reinsurer by a ceding company. Ceded risks are either proportional or non-proportional for both premiums and losses. Trading is based on profitability of actuarial calculations.

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Insuranceopedia Explains Cession

The number of risks transferred to the reinsurer by the ceding company may be determined at a percentage. The premiums for these risks are predetermined as well. This kind of cession is called proportional. The cession is called non-proportional when the reinsurer pays out only when the cost of a risk is above a certain amount.

Reinsurers want to buy risks at a lower price than the original cost, while ceding companies want to sell them at a higher price.

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