Alberta General Insurance Level 1 Practice Exam

Ceding in the context of insurance refers to the process of an insurance company transferring a portion of its risk to another insurance company, called a reinsurer. This is done in order to minimize the potential financial losses that may result from a covered event. Option A, challenging a claim, does not accurately describe ceding as it is related to risk transfer, not dispute resolution. Option C, canceling a policy, is not necessarily related to transferring risk but rather terminating coverage. Option D, increasing premium rates, is not the same as ceding as it pertains to the cost of insurance, not risk transfer.