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Reinsurance (Tables) | 6 Months Ended
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Jun. 30, 2022
Reinsurance Disclosures [Abstract] |
Effect of reinsurance transactions | The effect of all of our reinsurance agreements on premiums earned and losses incurred is shown in table 4.1 below.
Reinsurance |  |  |  |
Table | 4.1 |  |  |  |  |  |  |  |
|  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Premiums earned: |  |  |  |  |  |  |  |
Direct |  | $ | 287,846 |  |  | $ | 293,047 |  |  | $ | 575,119 |  |  | $ | 589,318 |
Assumed |  | 2,121 |  |  | 2,480 |  |  | 4,247 |  |  | 4,891 |
Ceded (1) |  | (34,270) |  |  | (43,988) |  |  | (68,429) |  |  | (87,625) |
Net premiums earned |  | $ | 255,697 |  |  | $ | 251,539 |  |  | $ | 510,937 |  |  | $ | 506,584 |
Losses incurred: |  |  |  |  |  |  |  |
Direct |  | $ | (109,334) |  |  | $ | 37,983 |  |  | $ | (130,426) |  |  | $ | 86,054 |
Assumed |  | (154) |  |  | 79 |  |  | (361) |  |  | 54 |
Ceded |  | 10,430 |  |  | (8,898) |  |  | 12,415 |  |  | (17,308) |
Losses incurred, net |  | $ | (99,058) |  |  | $ | 29,164 |  |  | $ | (118,372) |  |  | $ | 68,800 |
(1)Ceded premiums earned net of profit commission.
Schedule Of Quota Share Reinsurance Transactions | Table 4.2 below provides additional detail regarding our QSR Transactions.
Quota Share Reinsurance
Table | 4.2 |  |  |  |  |  |  |  |
Quota Share Contract |  | Covered Policy Years | 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
2019 QSR |  | 2019 | 30.0 | % |  | 62.0 | % |  | December 31, 2030
2020 QSR |  | 2020 | 12.5 | % |  | 62.0 | % |  | December 31, 2031
2020 QSR and 2021 QSR |  | 2020 | 17.5 | % |  | 62.0 | % |  | December 31, 2032
2020 QSR and 2021 QSR |  | 2021 | 17.5 | % |  | 61.9 | % |  | December 31, 2032
2021 QSR and 2022 QSR |  | 2021 | 12.5 | % |  | 57.5 | % |  | December 31, 2032
2021 QSR and 2022 QSR |  | 2022 | 15.0 | % |  | 57.5 | % |  | December 31, 2033
2022 QSR and 2023 QSR |  | 2022 | 15.0 | % |  | 62.0 | % |  | December 31, 2033
2022 QSR and 2023 QSR |  | 2023 | 15.0 | % |  | 62.0 | % |  | December 31, 2034
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 policies covered under the transaction remains below this ratio. (2) Eligible credit union business written before April 1, 2020 was covered by our 2019 and 2015 QSR Transactions. Table 4.3 provides additional detail regarding optional termination dates and optional reductions to our quota share percentage which can, in each case, be elected by us for a fee. Under the optional reduction to the quota share percentage, we may reduce our quota share percentage from the original percentage shown in table 4.2 to the percentage shown in table 4.3.
Quota Share Reinsurance
Table | 4.3 |  |  |  |  |  |
Quota Share Contract |  | Optional Termination Date (1) | Optional Quota Share % Reduction Date (2) |  | Optional Reduced Quota Share %
2015 QSR |  | December 31, 2022 | NA |  | NA
2019 QSR |  | December 31, 2022 | July 1, 2022 |  | 25% or 20%
2020 QSR |  | December 31, 2022 | July 1, 2022 |  | 10.5% or 8%
2020 QSR and 2021 QSR, 2020 Policy year |  | December 31, 2022 | July 1, 2022 |  | 14.5% or 12%
2020 QSR and 2021 QSR, 2021 Policy year |  | December 31, 2023 | July 1, 2022 |  | 14.5% or 12%
2021 QSR and 2022 QSR. 2021 Policy Year |  | December 31, 2023 | July 1, 2022 |  | 10.5% or 8%
2021 QSR and 2022 QSR, 2022 Policy Year |  | December 31, 2024 | July 1, 2023 |  | 12.5% or 10%
2022 QSR and 2023 QSR, 2022 Policy Year |  | December 31, 2024 | July 1, 2023 |  | 12.5% or 10%
2022 QSR and 2023 QSR, 2023 Policy Year |  | December 31, 2025 | July 1, 2024 |  | 12.5% or 10%
(1) We can elect early termination of the QSR Transaction beginning on this date, and bi-annually thereafter. (2) We can elect to reduce the quota share percentage beginning on this date, and bi-annually thereafter.
Effect of quota share reinsurance transactions on premiums earned and losses incurred | Table 4.4 below provides a summary of our QSR Transactions, for the three and six months ended June 30, 2022 and 2021.
Quota Share Reinsurance |  |  |  |
Table | 4.4 |  |  |  |  |  |  |  |
|  |  | Three Months Ended June 30, |  | Six Months Ended June 30,
(In thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Ceded premiums written and earned, net of profit commission |  | $ | 14,995 |  |  | $ | 33,983 |  |  | $ | 37,373 |  |  | $ | 67,373 |
Ceded losses incurred |  | (10,430) |  |  | 8,903 |  |  | (12,415) |  |  | 17,308 |
Ceding commissions (1) | 12,762 |  |  | 12,991 |  |  | 25,034 |  |  | 26,058 |
Profit commission |  | 48,814 |  |  | 30,978 |  |  | 87,794 |  |  | 62,922 |
(1) Ceding commissions are reported within Other underwriting and operating expenses, net on the consolidated statements of operations.
Schedule of coverages and retention | Tables 4.5a and 4.5b provide a summary of our Home Re Transactions as of June 30, 2022 and December 31, 2021.
Excess of Loss Reinsurance - Home Re Transactions
4.5a |  |  |  |  |  |
($ in thousands) | Issue Date | Policy In force Dates | Optional Call Date (1) | Legal Maturity | Initial First Layer Retention | Initial Excess of Loss Reinsurance Coverage
Home Re 2022-1, Ltd. | April 26, 2022 | May 29, 2021 - December 31, 2021 | April 25, 2028 | 12.5 years | $325,589 | $473,575
Home Re 2021-2, Ltd. | August 3, 2021 | January 1, 2021 - May 28, 2021 | July 25, 2028 | 12.5 years | 190,159 | 398,429
Home Re 2021-1, Ltd. | February 2, 2021 | August 1, 2020 - December 31, 2020 | January 25, 2028 | 12.5 years | 211,159 | 398,848
Home Re 2020-1, Ltd. | October 29, 2020 | January 1, 2020 - July 31, 2020 | October 25, 2027 | 10 years | 275,283 | 412,917
Home Re 2019-1, Ltd. | May 25, 2019 | January 1, 2018 - March 31, 2019 | May 25, 2026 | 10 years | 185,730 | 315,739
Home Re 2018-1, Ltd. | October 30, 2018 | July 1, 2016 - December 31, 2017 | October 25, 2025 | 10 years | 168,691 | 318,636
(1) We have the right to terminate the Home Re Transactions under certain circumstances and on any payment date on or after the respective Optional Call Date.
4.5b |  | Remaining First Layer Retention |  | Remaining Excess of Loss Reinsurance Coverage
($ in thousands) |  | June 30, 2022 |  | December 31, 2021 |  | June 30, 2022 |  | December 31, 2021
Home Re 2022-1, Ltd. |  | $ | 325,589 |  |  | $ | — |  |  | $ | 473,575 |  |  | $ | — |
Home Re 2021-2, Ltd. |  | 190,159 |  |  | 190,159 |  |  | 384,694 |  |  | 398,429 |
Home Re 2021-1, Ltd. |  | 211,142 |  |  | 211,142 |  |  | 337,270 |  |  | 387,830 |
Home Re 2020-1, Ltd. |  | 275,169 |  |  | 275,204 |  |  | 162,705 |  |  | 234,312 |
Home Re 2019-1, Ltd. |  | 183,789 |  |  | 183,917 |  |  | 208,146 |  |  | 208,146 |
Home Re 2018-1, Ltd. |  | 165,075 |  |  | 165,365 |  |  | 184,664 |  |  | 218,343 |
Schedule of total assets of Home Re | Table 4.6 presents the total assets of the Home Re Entities as of June 30, 2022 and December 31, 2021.
Home Re total assets
Table | 4.6 |  |
(In thousands) |  |
Home Re Entity |  | Total VIE Assets
June 30, 2022 |  |
Home Re 2022-1 Ltd. |  | $ | 473,575 |
Home Re 2021-2 Ltd. |  | 391,130 |
Home Re 2021-1 Ltd. |  | 345,131 |
Home Re 2020-1 Ltd. |  | 174,006 |
Home Re 2019-1 Ltd. |  | 208,146 |
Home Re 2018-1 Ltd. |  | 193,106 |
December 31, 2021 |  |
Home Re 2021-2 Ltd. |  | $ | 398,429 |
Home Re 2021-1 Ltd. |  | 398,848 |
Home Re 2020-1 Ltd. |  | 251,387 |
Home Re 2019-1 Ltd. |  | 208,146 |
Home Re 2018-1 Ltd. |  | 218,343 |

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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 https://asc.fasb.org/extlink&oid=123419778&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 https://asc.fasb.org/extlink&oid=123419778&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 https://asc.fasb.org/extlink&oid=123419778&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 https://asc.fasb.org/extlink&oid=123419778&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 https://asc.fasb.org/extlink&oid=123419778&loc=d3e5728-111685 + Details
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