Ceding is defined as the act of cession or ceding. It comes from the verb to cede. To cede, in the insurance industry, is a term which means to transfer the risk which could possibly have been incurred by a direct insurer (an insurance company) to his reinsurer (usually, an insurance agent appointed by the insurer or insurance company).
The insurer has the option of transfer all or a part of the risk to the reinsurer, as per the definition of cession or ceding. It involves the distribution of the sum of money for which a person's life or property (in other words, the principal amount of the policy taken by the person from an insurer) has been insured of a risk between the reinsurer and the reinsured under pro-rata reinsurance contracts. All the premiums and losses which are related to that risk are then distributed in the same proportion which has been specified in the reinsurance contract.
The insurer has the option of transfer all or a part of the risk to the reinsurer, as per the definition of cession or ceding. It involves the distribution of the sum of money for which a person's life or property (in other words, the principal amount of the policy taken by the person from an insurer) has been insured of a risk between the reinsurer and the reinsured under pro-rata reinsurance contracts. All the premiums and losses which are related to that risk are then distributed in the same proportion which has been specified in the reinsurance contract.