Match each fundamental reinsurance term to its correct definition.
- Ceding CompanyThe primary insurance company that transfers a portion of its risk to another insurer.
- Assuming InsurerThe company that accepts a portion of the risk transferred from the primary insurer.
- Treaty ReinsuranceAn automatic agreement where the reinsurer accepts all risks of a certain class.
- Facultative ReinsuranceAn agreement where risks are negotiated and transferred on an individual, case-by-case basis.
Answer
Ceding Company matches with the primary insurer transferring risk. Assuming Insurer matches with the company accepting the risk. Treaty Reinsurance matches with an automatic agreement for a class of risks. Facultative Reinsurance matches with a case-by-case risk transfer agreement.
Each matched pair accurately pairs a fundamental role or contract type with its statutory definition in reinsurance. The primary insurer that originates the policy and transfers risk is the ceding company. The insurer taking on that risk is the assuming insurer (reinsurer). When risk is transferred automatically for a whole class of business, it is governed by a treaty. When it is negotiated individually for specific exposures, it is facultative.
Step-by-Step Solution
Key Concept
Reinsurance Roles and Agreements