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    Question

    What is the role of a Ceding Company in insurance?

    A A Ceding Company assumes the risk from another insurance company. Correct Answer Incorrect Answer
    B A Ceding Company solely provides insurance coverage to policyholders. Correct Answer Incorrect Answer
    C A Ceding Company transfers part or all of the risk it has assumed to another insurance company. Correct Answer Incorrect Answer
    D A Ceding Company accepts part or all of the risk from another insurance company. Correct Answer Incorrect Answer
    E A Ceding Company invests the premiums received in financial markets. Correct Answer Incorrect Answer

    Solution

    Explanation: A Ceding Company acts as the primary insurer and transfers part or all of the risks it has underwritten to another insurance company known as the Reinsurer. This process is known as reinsurance, and it allows the Ceding Company to mitigate its risk exposure and share the premium received with the Reinsurer. In return, the Reinsurer assumes a portion of the liability and pays a commission to the Ceding Company for transferring the risk.

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