Proportion of gross premiums ceded to reinsurers, measuring the degree of risk transfer.
The cession ratio is the ratio of ceded premiums to gross written premiums, expressed as a percentage. It measures the fraction of risk transferred to reinsurance. Formula: cession ratio = ceded premiums / gross premiums. A high cession ratio (> 40%) indicates heavy reinsurance dependence, typically seen in captives, start-ups or insurers specializing in catastrophe risks. Rating agencies monitor this ratio as an indicator of standalone financial strength: a heavily cession-dependent cedant is exposed to reinsurer counterparty risk. The cession ratio varies by treaty type: 100% in fronting arrangements, 30–50% in standard quota share.
GWP 10 M EUR, ceded premiums 3.5 M EUR: cession ratio = 35%. Net premiums = 6.5 M EUR. A ratio > 100% would be a red flag (more premiums ceded than collected).
cession ratio, taux de rétrocession, cession rate, cession percentage