In which scenarios is the ceding of risk usually applied?

Ceding of risk refers specifically to the practice where an insurance company transfers a portion of its risk to a reinsurer. This is a common strategy employed by insurers to manage their exposure to potential losses. By ceding risk, the original insurer can protect itself against large claims or catastrophic events, thereby stabilizing its financial position and spreading the risk across other entities.

This transfer can involve various types of reinsurance agreements, such as quota share or excess of loss arrangements, allowing insurance companies to maintain solvency and ensure they have the capacity to cover claims without overexposing themselves to significant financial turmoil. When an insurer anticipates that certain aspects of its portfolio could lead to considerable liabilities, it becomes essential to cede a part of that risk to reinsurers, thereby mitigating the potential impact of those liabilities.

Other scenarios listed, such as policy cancellations, creating new policy types, or adjusting premiums, do not directly involve the process of ceding risk to a reinsurer. While these activities may be part of an insurance company's broader operations, they do not pertain to the specific practice of transferring risk. Therefore, option B correctly reflects the context in which ceding of risk is typically applied.