Reinsurance Ceding Commission Income
Earning a ceding commission from the reinsurer for the quality of the portfolio ceded.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Reinsurance Commission Receivable | Asset (+) | 12,000.00 | - |
| Reinsurance Commission Income | Revenue (+) | - | 12,000.00 |
💡 Accountant's Note
Reinsurers pay ceding commissions (typically 20-35% of ceded premium) to compensate the cedant for acquisition and admin costs. This is an important income item that partially offsets reinsurance costs.
Practitioner & Systems Framework
💻 ERP Architecture
Ceding commissions are recognised in the reinsurance accounting module as a percentage of the ceded premium (per the treaty commission rate). The commission is deducted from the reinsurance payable in the quarterly account settlement, or settled separately. Under IFRS 17, ceding commissions received reduce the cost of the reinsurance contract held and are reflected in the reinsurance CSM calculation. In the GL, commission income is presented separately from ceded premium to show the gross economics of the reinsurance arrangement.
⚠️ Audit Flags
Auditors verify that the commission rate applied matches the signed treaty terms. Profit commission treaties (where the commission varies with the loss ratio) require additional testing — the commission must be recomputed based on the actual loss ratio for the treaty period. Verify that ceding commissions are not recognised on unearned portions of ceded premium — the commission should be earned in proportion to the ceded premium.
📄 Required Documentation
Signed treaty confirming the commission rate, quarterly account statement showing the commission calculation, profit commission calculation if applicable, and reinsurance commission receivable aging schedule.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.