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📤 '''Ceded claim''' is a [[Definition:Claim | claim]] or portion of a claim that an [[Definition:Insurance carrier | insurance company]] transfers to a [[Definition:Reinsurance | reinsurer]] under the terms of a [[Definition:Reinsurance contract | reinsurance agreement]]. When a primary insurer — the cedent — purchases reinsurance, it shifts a defined share of its [[Definition:Loss | loss]] exposure to the reinsurer in exchange for [[Definition:Reinsurance premium | ceded premiums]]. The claims that fall within the scope of that arrangement and are passed through for reimbursement constitute ceded claims, and they are a fundamental element of insurance financial reporting, [[Definition:Reserving | reserving]], and [[Definition:Capital management | capital management]] across all major markets.

⚙️ How a ceded claim is calculated depends on the structure of the reinsurance program. Under a [[Definition:Quota share reinsurance | quota share treaty]], the reinsurer assumes a fixed percentage of every claim in the covered portfolio, so ceded claims arise proportionally on every loss. Under an [[Definition:Excess of loss reinsurance | excess-of-loss treaty]], the reinsurer's obligation triggers only once a claim or aggregation of claims exceeds a specified [[Definition:Retention | retention]], meaning ceded claims concentrate in larger or catastrophic losses. The cedent records a [[Definition:Reinsurance recoverable | reinsurance recoverable]] — an asset on its [[Definition:Balance sheet | balance sheet]] — representing amounts expected from the reinsurer. Accounting standards require careful treatment: under U.S. GAAP and [[Definition:IFRS 17 | IFRS 17]], the cedent must evaluate the [[Definition:Collectibility | collectibility]] of these recoverables and, in many frameworks, establish an [[Definition:Allowance for doubtful accounts | allowance]] for potential non-recovery. Regulatory regimes such as [[Definition:Solvency II | Solvency II]] and the [[Definition:National Association of Insurance Commissioners (NAIC) | NAIC]] statutory framework impose their own rules on how ceded claims reduce net reserves and influence [[Definition:Regulatory capital | capital]] calculations.

💡 Ceded claims are far more than an accounting entry — they are the mechanism by which reinsurance delivers its core economic benefit: reducing the cedent's net exposure and smoothing earnings volatility. Timely reporting and settlement of ceded claims depends on robust [[Definition:Bordereau | bordereau]] reporting between the cedent and its reinsurers, and disputes over claim cession — particularly whether a loss falls within the scope of the treaty or whether proper notice was given — can become significant points of contention. In the [[Definition:Lloyd's of London | Lloyd's]] market, where [[Definition:Managing agent | managing agents]] often cede claims to multiple [[Definition:Lloyd's syndicate | syndicates]] and external reinsurers, the operational complexity of tracking ceded claims is substantial. More broadly, the pattern of ceded claims over time reveals how effectively an insurer is using its reinsurance program: a company whose net [[Definition:Loss ratio | loss ratio]] remains high despite significant cession may have a poorly structured program or may be retaining the wrong layers of risk.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Reinsurance recoverable]]
* [[Definition:Reinsurance]]
* [[Definition:Quota share reinsurance]]
* [[Definition:Excess of loss reinsurance]]
* [[Definition:Retention]]
* [[Definition:Bordereau]]
{{Div col end}}

Definition:Ceded claim - Revision history

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