NOTE 16 Losses and Loss Adjustment Reserve

The Company is exposed to the risk of losses from claims in the insurance company operations of Wright. To mitigate this risk we reinsure 100% percent of the underwriting claims exposure with FEMA for basic admitted flood policies and with reinsurance carriers with an AM Best Company rating of “A” or better for all other claims exposure. Although the reinsurers are liable to the Company for amounts reinsured, the Company remains primarily liable to its policyholders for the full amount of the policies written whether or not the reinsurers meet their obligations to the Company when they become due. The effects of reinsurance on premiums written and earned are as follows:


(in thousands)	Period from May 1, 2014 to December 31, 2014
	Written			Earned
Direct premiums	$	439,828		$	408,056
Assumed premiums		(1	)		199
Ceded premiums		439,819			408,247

Net premiums	$	8		$	8

All premiums written by WNFIC under the National Flood Insurance Program are 100% ceded to FEMA, for which the Company received a 30.7% expense allowance from May 1, 2014 through September 30, 2014 and received a 30.8% expense allowance from October 1, 2014 through December 31, 2014. For the period from May 1, 2014 through December 31, 2014, the Company ceded $439.0 million of written premiums.

Effective April 1, 2014, WNFIC is also a party to a quota share agreement whereby it cedes 100% of its gross excess flood premiums which excludes fees to Arch Reinsurance Company and receives a 30.5% commission. WNFIC ceded $0.8 million for the period from May 1 through December 31, 2014. No loss data exists on this agreement.

The Company also ceded 100% of the Homeowners and Private Passenger Auto Liability to Stillwater Insurance Company formerly known as Fidelity National Insurance Company. This business is in runoff. Therefore, only loss data still exists on this business. As of December 31, 2014, ceded unpaid losses and loss adjustment expenses for Homeowners and Private Passenger Auto Liability was $8,698 and $61,634, respectively. The incurred but not reported was $102 for Homeowners and $39,424 for Private Passenger Auto Liability. The reinsurance recoverable balance as of December 31, 2014 was $333.6 million that is comprised of recoverables on unpaid losses and loss expenses of $13.0 million and prepaid reinsurance premiums of $320.6 million.

There was no net activity in the reserve for losses and loss adjustment expense during the period May 1, 2014 through December 31, 2014, as the Company’s direct premiums written were 100% ceded to three reinsurers. The balance of the reserve for losses and loss adjustment expense, excluding related reinsurance recoverable, as of December 31, 2014 was $13.0 million.