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Reinsurance | 12 Months Ended
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Dec. 31, 2014
Reinsurance Disclosures [Abstract] |
Reinsurance | Reinsurance Our Financial Statements reflect the effects of assumed and ceded reinsurance transactions. Assumed reinsurance refers to the acceptance of certain insurance risks that other insurance entities have underwritten. Ceded reinsurance involves transferring certain insurance risks (along with the related written and earned premiums) that we have underwritten to other insurance companies that agree to share these risks. The primary purpose of ceded reinsurance is to protect the Insurance Subsidiaries from potential losses in excess of the amount that we are prepared to accept. Our major treaties covering property, property catastrophe, and casualty business are excess of loss contracts. In addition, we have an intercompany quota share pooling arrangement and other minor quota share treaties. As a Standard Commercial Lines and E&S Lines writer, we are required to participate in Terrorism Risk Insurance Program Reauthorization Act ("TRIPRA"), which was extended to December 31, 2020. TRIPRA requires private insurers and the United States government to share the risk of loss on future acts of terrorism certified by the U.S. Secretary of the Treasury. Under TRIPRA, each participating insurer is responsible for paying a deductible of specified losses before federal assistance is available. This deductible is based on a percentage of the prior year’s applicable Standard Commercial Lines and E&S Lines premiums. In 2015, our deductible is approximately $254 million. For losses above the deductible, the federal government will pay 85% of losses to an industry limit of $100 billion, and the insurer retains 15%. The federal share of losses will be reduced by 1% each year to 80% by 2020. The Insurance Subsidiaries remain liable to policyholders to the extent that any reinsurer becomes unable to meet their contractual obligations. We evaluate and monitor the financial condition of our reinsurers under voluntary reinsurance arrangements to minimize our exposure to significant losses from reinsurer insolvencies. On an ongoing basis, we review amounts outstanding, length of collection period, changes in reinsurer credit ratings, and other relevant factors to determine collectability of reinsurance recoverables. The allowance for uncollectible reinsurance recoverables was $6.9 million at December 31, 2014 and $5.1 million at December 31, 2013. The following table represents our total reinsurance balances segregated by reinsurer to depict our concentration of risk throughout our reinsurance portfolio:
|  | As of December 31, 2014 |  | As of December 31, 2013
($ in thousands) |  | Reinsurance Balances |  | % of Net Unsecured Reinsurance |  | Reinsurance Balances |  | % of Net Unsecured Reinsurance
Total reinsurance recoverables |  | $ | 581,548 |  |  |  |  |  | $ | 550,897 |  |  |  |
Total prepaid reinsurance premiums |  | 146,993 |  |  |  |  |  | 143,000 |  |  |  |
Less: collateral 1 |  | (114,843 | ) |  |  |  |  | (119,732 | ) |  |  |
Net unsecured reinsurance balances |  | 613,698 |  |  |  |  |  | 574,165 |  |  |  |
Federal and state pools 2: |  |  |  |  |  |  |  |  |  |  |  |
NFIP |  | 172,547 |  |  | 28 |  |  | 177,637 |  |  | 31 |
NJ Unsatisfied Claim Judgment Fund |  | 76,342 |  |  | 13 |  |  | 71,732 |  |  | 12 |
Other |  | 2,557 |  |  | — |  |  | 3,034 |  |  | 1 |
Total federal and state pools |  | 251,446 |  |  | 41 |  |  | 252,403 |  |  | 44 |
Remaining unsecured reinsurance |  | 362,252 |  |  | 59 |  |  | 321,762 |  |  | 56 |
Hannover Ruckversicherungs AG (A.M. Best rated “A+”) |  | 79,864 |  |  | 13 |  |  | 72,565 |  |  | 13 |
Munich Re Group (A.M. Best rated “A+”) |  | 78,347 |  |  | 13 |  |  | 69,749 |  |  | 12 |
Swiss Re Group (A.M. Best rated “A+”) |  | 55,026 |  |  | 9 |  |  | 48,234 |  |  | 8 |
AXIS Reinsurance Company (A.M. Best rated “A+”) |  | 51,014 |  |  | 8 |  |  | 45,114 |  |  | 8 |
Partner Reinsurance Company of the U.S. (A.M. Best rated “A+”) |  | 25,424 |  |  | 4 |  |  | 25,730 |  |  | 4 |
QBE Reinsurance Corporation (A.M. Best rated "A") |  | 13,069 |  |  | 2 |  |  | 15,665 |  |  | 3 |
All other reinsurers |  | 59,508 |  |  | 10 |  |  | 44,705 |  |  | 8 |
Total |  | $ | 362,252 |  |  | 59 | % |  | $ | 321,762 |  |  | 56 | %
1 Includes letters of credit, trust funds, and funds withheld. 2 Considered to have minimal risk of default. Note: Some amounts may not foot due to rounding. Under our reinsurance arrangements, which are prospective in nature, reinsurance premiums ceded are recorded as prepaid reinsurance and amortized over the remaining contract period in proportion to the reinsurance protection provided, or recorded periodically, as per the terms of the contract, in a direct relationship to the gross premium recording. Reinsurance recoveries are recognized as gross losses are incurred. The following table contains a listing of direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and losses and loss expenses incurred:
($ in thousands) |  | 2014 |  | 2013 |  | 2012
Premiums written: |  |  |  |  |  |  |  |  |
Direct |  | $ | 2,228,270 |  |  | 2,133,793 |  |  | 1,955,667 |
Assumed |  | 26,306 |  |  | 43,650 |  |  | 50,938 |
Ceded |  | (369,296 | ) |  | (367,284 | ) |  | (339,722 | )
Net |  | $ | 1,885,280 |  |  | 1,810,159 |  |  | 1,666,883 |
Premiums earned: |  |  |  |  |  |  |  |  |
Direct |  | $ | 2,183,258 |  |  | 2,048,530 |  |  | 1,873,007 |
Assumed |  | 34,653 |  |  | 44,464 |  |  | 65,884 |
Ceded |  | (365,302 | ) |  | (356,922 | ) |  | (354,772 | )
Net |  | $ | 1,852,609 |  |  | 1,736,072 |  |  | 1,584,119 |
Losses and loss expenses incurred: |  |  |  |  |  |  |  |  |
Direct |  | $ | 1,314,864 |  |  | 1,370,293 |  |  | 2,394,640 |
Assumed |  | 26,187 |  |  | 32,678 |  |  | 29,175 |
Ceded |  | (183,550 | ) |  | (281,233 | ) |  | (1,302,825 | )
Net |  | $ | 1,157,501 |  |  | 1,121,738 |  |  | 1,120,990 |
Direct and ceded losses and loss expenses decreased significantly in 2013, primarily due to the impact of Superstorm Sandy, for which $1.1 billion in flood losses were ceded to the federal government in 2012. The ceded premiums and losses related to our participation in the NFIP, under which 100% of our flood premiums, losses and loss expenses are ceded to the NFIP, are as follows:
Ceded to NFIP ($ in thousands) |  | 2014 |  | 2013 |  | 2012
Ceded premiums written |  | $ | (237,718 | ) |  | (236,309 | ) |  | (221,094 | )
Ceded premiums earned |  | (234,224 | ) |  | (228,650 | ) |  | (212,177 | )
Ceded losses and loss expenses incurred |  | (57,323 | ) |  | (183,142 | ) |  | (1,119,303 | )

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 310 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6485557&loc=d3e21549-158491 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 13 -Article 7 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27261-158547 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27374-158547 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6811-158387 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6816-158387 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 6 -Article 7 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03.6,13) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 13 -URI http://asc.fasb.org/extlink&oid=34714010&loc=d3e27795-158548 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=34714010&loc=d3e27703-158548 + Details
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