Ceded Premium
An Insurance Company may choose to cede all or a portion of it’s risk to a Reinsurer pursuant to a reinsurance agreement. The Insurance Company records journal entries for ceded premium at the contract effective date, and expenses the reinsurance premium over the term of the agreement. The reinsurance expense is recorded independently of the cash paid to the Reinsurer which requires separate journal entries. There are unique financial statement presentation requirements governed by the GAAP or Statutory-basis accounting standards followed by the Insurance Company.
