In insurance terminology, what does the term 'ceding' refer to?

The term 'ceding' in insurance refers specifically to the act of transferring risks from one insurer to another. This process commonly occurs in reinsurance, where an insurance company (the ceding company) transfers a portion of its risk to a reinsurer to reduce its exposure to potential claims. By ceding a portion of its risk, the primary insurer can stabilize its financial position and increase its capacity to write additional policies.

In contrast, accepting risks pertains to taking on potential liabilities, evaluating risks involves assessing the likelihood and potential impact of those risks, and mitigating risks is focused on reducing the severity or impact of those risks rather than transferring them. Each of these activities serves different purposes in risk management and insurance operations, but ceding specifically denotes the transfer aspect.