Cession is a core term in the field of reinsurance, referring to the act by which the original insurer (ceding company) transfers part of the risks and liabilities it has underwritten to a reinsurer (assuming company). In foreign trade, cession is commonly used in cargo transportation insurance, export credit insurance, and other scenarios to diversify huge risks and expand underwriting capacity. When using cession, note the following: the cession ratio, ceding commission, and loss sharing method must be clearly specified in the reinsurance contract; cession is different from co-insurance, in which multiple insurers directly underwrite the same subject matter together, whereas cession is the original insurer transferring part of already underwritten risks; it is also different from retrocession, which is when a reinsurer further cedes risks. Foreign trade practitioners should understand the impact of cession on insurance costs and claims efficiency, and reasonably design insurance plans.
📝 Examples
1. Our company, as the original insurer, cedes 30% of the export cargo transportation insurance to a reinsurance company to reduce the risk exposure of a single transaction. (Note: Cession is used to diversify cargo insurance risks.)
2. According to the reinsurance contract, the ceding commission is paid at a certain percentage of the ceded premium, and losses are shared by the reinsurer according to the cession ratio. (Note: Cession involves commission and loss sharing.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner