Reinsurance is a form of insurance in which insurers pass on a portion of their risk to other insurers, thereby spreading losses among more than one company. In a reinsurance transaction, one insurance company purchases coverage from a second insurance company for a risk that the first insurance company is insuring. In such a transaction, the first insurance company would be called the "ceding company" or "cedant," and the second insurance company would be called the "reinsurer." This reinsurance relationship does not affect the insurance policies that the cedant issues to its policyholders; the cedant remains liable to pay its policyholders for insured losses regardless of the reinsurance coverage, and in most situations, the insured is not even aware that its insurer has reinsured a portion of its coverage.
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