What basic difference between ceding company and re insurance?
The basic difference between ceding company and reinsurance is that the ceding company is the company that transfers some or all of its risks to the reinsurer, while the reinsurer is the company that accepts the risk transferred by the ceding company. The ceding company remains responsible for the initial underwriting of the policy and retains some portion of the risk whereas the reinsurer is responsible for the claims from the ceded policies. In short, ceding company is the one that sells insurance policies while reinsurer is the one that provides insurance to the ceding company.
The basic difference between a ceding company and reinsurance lies in the roles they play in the insurance industry:
1. Ceding Company: A ceding company is an insurance company that transfers or "cedes" a portion of its risk to a reinsurer. It does this by purchasing reinsurance policies from a reinsurer. The ceding company retains some of the risk and transfers the rest to the reinsurer. The ceding company is responsible for underwriting the insurance policies, collecting premiums, and handling claims.
2. Reinsurance: Reinsurance refers to the process by which an insurance company transfers a portion of its risk to another insurance company, known as a reinsurer. The reinsurer assumes the risks and liabilities of the ceding company in exchange for a premium. Reinsurance provides financial protection and stability to the ceding company by spreading the risk across multiple insurers.
In summary, the ceding company is the insurance company that transfers its risk, while reinsurance refers to the process of transferring and assuming that risk.