Ceded premiums

Ceded premium, or ceded written premium, is the share of premium the cedant passes to its reinsurers, and the direct cost of its reinsurance program. How it is calculated depends on the treaty. On a quota share it is the cession rate applied to gross written premium (GWP). On excess of loss, the cedant pays a rate on subject premium or a flat amount. Ceded premium comes straight off what is left for net losses and expenses: net premium = GWP minus ceded premium. It is often confused with net reinsurance cost, which also deducts the ceding commissions received from the reinsurer; on a well-commissioned quota share the gap between the two is wide. Its counterpart on the claims side is ceded losses, and the ratio of the two gives the ceded loss ratio, which the cedant tracks to see what the program pays back against what it costs. IFRS 17, effective January 1, 2023, requires reinsurance contracts held to be presented separately from insurance contracts issued, so the cost of reinsurance shows up on its own line, next to insurance revenue.