Question

What is ceding commission?

a.

The commission paid by the reinsurer to the ceding insurer

b.

The commission paid by the ceding insurer to agents and brokers

c.

The commission paid by the ceding insurer to the reinsurer to compensate for original commissions and other expenses

d.

The commission paid by the reinsurer to the ceding insurer to compensate for acquisition cost

Posted under IC85 Reinsurance Management

Answer: (c).The commission paid by the ceding insurer to the reinsurer to compensate for original commissions and other expenses Explanation:The reinsurer agrees a commission by way of percentage of reinsurance premium given to him, known as ceding commission, to the ceding insurer to compensate for his original commissions and brokerages, acquisition cost, costs of keeping the business on the books, and administration expenses.

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