Reinsurance treaties speak of the slice of risk that moves from one company to another. A cession is the amount or proportion of risk that a primary insurer transfers to a reinsurer under a reinsurance contract. It may be expressed as a percentage of premium and loss or as a layer of excess coverage.

Each cession generates a corresponding obligation for the reinsurer to pay its share of covered losses and a right to receive its share of premium. Bordereaux and accounts report cessions periodically. Facultative cessions are negotiated risk by risk; treaty cessions occur automatically within agreed terms.

Accurate recording of cessions is essential for both statutory accounting and internal experience analysis. Disputes can arise over whether a particular loss falls within the scope of the cession. Clear definitions of covered business and exclusions reduce that friction.

• Portion of risk transferred to a reinsurer
• May be proportional or excess of loss
• Reported through accounts and bordereaux
• Creates mutual rights and obligations