Those premiums arising from policies that an insurer transfers, in part or in whole (as the ceding company or reinsured), to another insurance company are called:

Question

Options

• Atransferred premiums
• Bpurchase premiums
• Creserved premiums
• Dceded reinsurance premiums

• A
  11% (3)
• B
  4% (1)
• C
  11% (3)
• D
  75% (21)

Explanation

Ceded reinsurance premiums (D) is correct because in reinsurance terminology, when a primary insurer (the ceding company) transfers risk to a reinsurer, the premiums paid for that transferred coverage are specifically called "ceded" premiums - "cede" meaning to yield or transfer. Options A ("transferred premiums") and B ("purchase premiums") are invented terms that don't exist in insurance/reinsurance vocabulary, making them easy eliminations. Option C ("reserved premiums") sounds plausible but refers to a different concept - reserves relate to funds set aside for future claim liabilities, not risk transfer. Memory tip: Link "cede" to "secede" - just as a state secedes (separates from) a union, a ceding company separates a portion of its risk (and the associated premiums) from its own books and hands it off to the reinsurer.

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