Reinsurance

12 Months Ended

Dec. 31, 2020

In the normal course of business, the Company’s insurance subsidiaries cede a portion of their premium through pro rata and excess of loss reinsurance agreements on a treaty or facultative basis. The Company’s reinsurance subsidiaries participate in “common account” retrocessional arrangements for certain pro rata treaties. Such arrangements reduce the effect of individual or aggregate losses to all companies participating on such treaties, including the reinsurers, such as the Company’s reinsurance subsidiaries, and the ceding company. In addition, the Company’s reinsurance subsidiaries may purchase retrocessional coverage as part of their risk management program. The Company’s mortgage subsidiaries cede a portion of their premium through quota share arrangements and enter into various aggregate excess of loss mortgage reinsurance agreements with various special purpose reinsurance companies. Reinsurance recoverables are recorded as assets, predicated on the reinsurers’ ability to meet their obligations under the reinsurance agreements. If the reinsurers are unable to satisfy their obligations under the

agreements, the Company’s insurance or reinsurance subsidiaries would be liable for such defaulted amounts.

The effects of reinsurance on the Company’s written and earned premiums and losses and loss adjustment expenses with unaffiliated reinsurers were as follows:


	Year Ended December 31,
	2020		2019		2018
Premiums Written
Direct	$	6,553,910	$	5,681,523	$	4,838,902
Assumed	3,534,158		2,457,437		2,122,102
Ceded	(2,650,352)		(2,099,893)		(1,614,257)
Net	$	7,437,716	$	6,039,067	$	5,346,747

Premiums Earned
Direct	$	6,361,451	$	5,447,829	$	4,799,842
Assumed	3,213,873		2,337,950		1,988,038
Ceded	(2,583,389)		(1,999,281)		(1,555,905)
Net	$	6,991,935	$	5,786,498	$	5,231,975

Losses and Loss Adjustment Expenses
Direct	$	4,392,392	$	2,953,072	$	2,472,133
Assumed	2,204,323		1,602,528		1,307,317
Ceded	(1,907,116)		(1,422,148)		(889,344)
Net	$	4,689,599	$	3,133,452	$	2,890,106

Bellemeade Re

The Company has entered into various aggregate excess of loss mortgage reinsurance agreements with various special purpose reinsurance companies domiciled in Bermuda (the “Bellemeade Agreements”). For the respective coverage periods, the Company will retain the first layer of the respective aggregate losses and the special purpose reinsurance companies will provide second layer coverage up to the outstanding coverage amount. The Company will then retain losses in excess of the outstanding coverage limit. The aggregate excess of loss reinsurance coverage decreases over a ten-year period as the underlying covered mortgages amortize.

The following table summarizes the respective coverages and retentions at December 31, 2020:


			December 31, 2020
	Initial Coverage at Issuance		Current Coverage		Remaining Retention, Net
Bellemeade 2017-1 Ltd. (1)	368,114		145,573		125,953
Bellemeade 2018-1 Ltd. (2)	374,460		250,095		123,690
Bellemeade 2018-2 Ltd. (3)	653,278		108,395		305,606
Bellemeade 2018-3 Ltd. (4)	506,110		302,563		129,874
Bellemeade 2019-1 Ltd. (5)	341,790		219,256		116,530
Bellemeade 2019-2 Ltd. (6)	621,022		398,316		162,457
Bellemeade 2019-3 Ltd. (7)	700,920		528,084		181,036
Bellemeade 2019-4 Ltd. (8)	577,267		468,737		118,102
Bellemeade 2020-1 Ltd. (9)	528,540		308,458		754,782
Bellemeade 2020-2 Ltd. (10)	449,167		449,167		239,278
Bellemeade 2020-3 Ltd. (11)	451,816		451,816		171,580
Bellemeade 2020-4 Ltd. (12)	337,013		337,013		147,466
Total	$	5,909,497	$	3,967,473	$	2,576,354

(1) Issued in October 2017, covering in-force policies issued between January 1, 2017 and June 30, 2017.

(2) Issued in April 2018, covering in-force policies issued between July 1, 2017 and December 31, 2017.

(3) Issued in August 2018, covering in-force policies issued between April 1, 2013 and December 31, 2015.

(4) Issued in October 2018, covering in-force policies issued between January 1, 2018 and June 30, 2018.

(5) Issued in March 2019, covering in-force policies primarily issued between 2005 to 2008 under United Guaranty Residential Insurance Company (“UGRIC”); as well as policies issued through 2015 under both UGRIC and Arch Mortgage Insurance Company.

(6) Issued in April 2019, covering in-force policies issued between July 1, 2018 and December 31, 2018.

(7) Issued in July 2019, covering in-force policies issued in 2016.

(8) Issued in October 2019, covering in-force policies issued between January 1, 2019 and June 30, 2019.

(9) Issued in June 2020, covering in-force policies issued between July 1, 2019 and December 31, 2019. $450 million was directly funded by Bellemeade 2020-1 Ltd. with an additional $79 million of capacity provided directly to Arch MI U.S. by a separate panel of reinsurers.

(10) Issued in September 2020, covering in-force policies issued between January 1, 2020 and May 31, 2020. $423 million was directly funded by Bellemeade 2020-2 Ltd. with an additional $26 million of capacity provided directly to Arch MI U.S. by a separate panel of reinsurers.

(11) Issued in November 2020, covering in-force policies issued between June 1, 2020 and August 31, 2020. $418 million was directly funded by Bellemeade 2020-3 Ltd. with an additional $34 million of capacity provided directly to Arch MI U.S. by a separate panel of reinsurers.

(12) Issued in December 2020, covering in-force policies issued between July 1, 2019 and December 31, 2019. $321 million was directly funded by Bellemeade 2020-4 Ltd. with an additional $16 million of capacity provided directly to Arch MI U.S. by a separate panel of reinsurers.

See Note 12, “Variable Interest Entity and Noncontrolling Interests.”