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Reinsurance (Tables) | 12 Months Ended
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Dec. 31, 2020
Reinsurance Disclosures [Abstract] |
Effect of reinsurance agreements on premiums earned and losses incurred | Table 9.1 below shows the effect of all reinsurance agreements on premiums earned and losses incurred as reflected in the consolidated statements of operations.
Reinsurance
Table | 9.1 |  |  |  |  |  |
|  | Years ended December 31,
(In thousands) |  | 2020 |  | 2019 |  | 2018
Premiums earned: |  |  |  |  |  |
Direct |  | $ | 1,199,824 |  |  | $ | 1,155,240 |  |  | $ | 1,084,748 |
Assumed |  | 10,848 |  |  | 5,085 |  |  | 1,805 |
Ceded |  | (188,729) |  |  | (129,337) |  |  | (111,391) |
Net premiums earned |  | 1,021,943 |  |  | 1,030,988 |  |  | 975,162 |
Losses incurred: |  |  |  |  |  |
Direct |  | 442,194 |  |  | 130,100 |  |  | 43,060 |
Assumed |  | 555 |  |  | (125) |  |  | 331 |
Ceded |  | (77,975) |  |  | (11,400) |  |  | (6,829) |
Net losses incurred |  | $ | 364,774 |  |  | $ | 118,575 |  |  | $ | 36,562 |
Schedule of Quota Share Reinsurance Agreements | Table 9.2 below provides additional detail regarding our QSR agreements.
Reinsurance
Table | 9.2 |  |  |  |  |  |  |  |
Quota Share Contract |  | Policy Year | Quota Share % |  | Annual Loss Ratio to Exhaust Profit Commission (1) |  | Contractual Termination Date
2015 QSR |  | Prior to 2017 | 15.0 | % |  | 68.0 | % |  | December 31, 2031
2017 QSR |  | 2017 | 30.0 | % |  | 60.0 | % |  | December 31, 2028
2018 QSR |  | 2018 | 30.0 | % |  | 62.0 | % |  | December 31, 2029
2019 QSR |  | 2019 | 30.0 | % |  | 62.0 | % |  | December 31, 2030
2020 QSR - 1 Year |  | 2020 | 12.5 | % |  | 62.0 | % |  | December 31, 2031
2020 QSR - 2 Year |  | 2020 - 2021 | 17.5 | % |  | 62.0 | % |  | December 31, 2032
Credit Union QSR (2) |  | 2020-2025 | 65.0 | % |  | 50.0 | % |  | December 31, 2039
(1) We will receive a profit commission provided the annual loss ratio on loans covered under the transaction remains below this ratio. (2) Eligible credit union business written before 2020 was covered by our 2019 and prior QSR Transactions. Table 9.3 provides additional detail regarding optional termination dates and optional reductions to our quota share percentage. The optional reduction to the quota share percentage would give us an option to reduce our quota share percentage from the original percentage as shown in table 9.2.
Reinsurance
Table | 9.3 |  |  |  |  |  |  |
Quota Share Contract |  | Optional Termination Date (1) | Optional Quota Share % Reduction Date (2) |  | Quota Share % Reduction |
2015 QSR |  | June 30, 2021 | NA |  | NA |
2017 QSR |  | December 31, 2021 | NA |  | NA |
2018 QSR |  | December 31, 2021 | NA |  | NA |
2019 QSR |  | December 31, 2021 | July 1, 2020 |  | 25% or 20% |
2020 QSR - 1 Year |  | December 31, 2022 | July 1, 2021 |  | 10.5% or 8% |
2020 QSR - 2 Year |  | December 31, 2023 | July 1, 2021 |  | 14.5% or 12% |
(1) We can elect early termination of the QSR agreement beginning on this date, and bi-annually thereafter for the 2015 QSR, 2019 QSR, and 2020 QSR. Early termination of the 2018 QSR can be elected annually after this date. (2) We can elect to reduce the quota share percentage beginning on this date, and bi-annually thereafter.
Quota share reinsurance agreements on premiums earned and losses incurred | Table 9.4 provides a summary of our quota share reinsurance agreements for 2020, 2019, and 2018.
Quota share reinsurance
Table | 9.4 |  |  |  |  |  |
|  | Years ended December 31,
(In thousands) |  | 2020 |  | 2019 |  | 2018
Ceded premiums written and earned, net of profit commission |  | $ | 167,930 |  |  | $ | 111,550 |  |  | $ | 108,337 |
Ceded losses incurred |  | 78,012 |  |  | 11,395 |  |  | 6,543 |
Ceding commissions (1) | 48,077 |  |  | 48,793 |  |  | 51,201 |
Profit commission |  | 72,452 |  |  | 139,179 |  |  | 147,667 |
(1)Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations.
Reinsurance retention policy | Table 9.5 provides a summary of our excess of loss reinsurance agreements as of December 31, 2020, December 31, 2019 and December 31, 2018.
Excess of Loss Reinsurance |  |  |
Table 9.5 |  |  |
(In thousands) | Home Re 2020-1, Ltd. | Home Re 2019-1, Ltd. | Home Re 2018-1, Ltd.
Issue Date | October, 2020 | May 1, 2019 | October 1, 2018
Policy Inforce Dates | January 1, 2020 - July 31, 2020 | January 1, 2018 - March 31, 2019 | July 1, 2016 - December 31, 2017
Termination Option Date (1) | October 25, 2030 | May 25, 2026 | October 25, 2025
Initial First Layer Retention | 275,283 | 185,730 | 168,691
Initial Excess of Loss Reinsurance Coverage | 412,917 | 315,739 | 318,636
2020 |  |  |
Remaining First Layer Retention | 275,283 | 184,514 | 166,005
Remaining Excess of Loss Reinsurance Coverage | 412,917 | 208,146 | 218,343
2019 |  |  |
Remaining First Layer Retention | — | 185,636 | 167,779
Remaining Excess of Loss Reinsurance Coverage | — | 271,021 | 260,957
2018 |  |  |
Remaining First Layer Retention | — | — | 168,691
Remaining Excess of Loss Reinsurance Coverage | — | — | 318,636
(1)We have the right to terminate the excess-of-loss reinsurance agreements under certain circumstances and on any payment date on or after the respective termination option date.
Schedule of total assets of Home Re Entities | Table 9.6 presents the total assets of Home Re Entities as of December 31, 2020 , December 31, 2019 and December 31, 2018.
Home Re Entities total assets
Table | 9.6 |  |
(In thousands) |  |
Home Re Entity |  | Total VIE Assets
December 31, 2020 |  |
Home Re 2018-01 Ltd. |  | $ | 218,343 |
Home Re 2019-01 Ltd. |  | $ | 208,146 |
Home Re 2020-01 Ltd. |  | $ | 412,917 |
December 31, 2019 |  |
Home Re 2018-01 Ltd. |  | $ | 269,451 |
Home Re 2019-01 Ltd. |  | $ | 283,150 |
December 31, 2018 |  |
Home Re 2018-01 Ltd. |  | $ | 318,636 |

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- Definition Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 5A -URI http://asc.fasb.org/extlink&oid=118582676&loc=SL6759159-111685 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=118582676&loc=d3e5747-111685 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=118582676&loc=SL6228884-111685 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=118582676&loc=d3e5710-111685 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=118582676&loc=d3e5728-111685 + Details
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