What Does Primary Insurer Mean?
A primary insurer is the insurance company that sells an insurance policy to a client, and then purchases reinsurance. As insurance companies are at risk of unforeseen losses due to high-risk entities, the primary insurer is responsible for transferring the risk to a reinsurer through a cessation process and by contractual agreement. This is the reason why the primary insurer is considered as the "ceding company" where businesses originate.
In order to protect the insurance company from any major financial losses, it is the role of the primary insurer to hold a designated amount of risk while the amounts over and above that are placed on the reinsurance company.