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Reinsurance
 3 Months Ended
Mar. 31, 2020
Reinsurance Disclosures [Abstract]  
Reinsurance Reinsurance
We evaluate and monitor the financial condition of our reinsurers under voluntary reinsurance arrangements to minimize our exposure to significant losses from reinsurer insolvencies. The following table provides (i) a disaggregation of our reinsurance recoverable balance by financial strength rating, and (ii) an aging analysis of our past due reinsurance recoverable balances as of March 31, 2020:
 
 
March 31, 2020
($ in thousands)
 
Current
 
Past Due
 
Total Reinsurance Recoverables
Financial strength rating of rated reinsurers1
 
 
 
 
 
 
A++
 
$
20,835

 
$
—

 
$
20,835

A+
 
428,354

 
3,229

 
431,583

A
 
25,915

 
—

 
25,915

A-
 
508

 
—

 
508

B++
 
316

 
94

 
410

B+
 
21

 
—

 
21

Total rated reinsurers
 
$
475,949

 
$
3,323

 
$
479,272

 
 
 
 
 
 
 
Non-rated reinsurers
 
 
 
 
 
 
Federal and state pools
 
80,245

 
60

 
80,305

Other than federal and state pools
 
5,459

 
—

 
5,459

Total non-rated reinsurers
 
$
85,704

 
$
60

 
$
85,764

 
 
 
 
 
 
 
Total reinsurance recoverable, gross
 
$
561,653

 
$
3,383

 
$
565,036

Less: allowance for credit losses2
 
(1,502
)
 
—

 
(1,502
)
Total reinsurance recoverable, net
 
$
560,151

 
$
3,383

 
$
563,534

1Credit ratings as of March 31, 2020.
2Represents our current expectation of credit losses on total current and past due reinsurance recoverables, and is not identifiable by reinsurer.

We evaluate our estimate of expected credit losses through the methodology outlined in Note 1. “Basis of Presentation and Accounting Policies.”

The following table provides a rollforward of the allowance for credit losses on our reinsurance recoverable balance at March 31, 2020:
($ in thousands)
 
March 31, 2020
Balance, December 31, 2019
 
$
4,400

Cumulative effect adjustment1
 
(2,903
)
Balance, January 1, 2020
 
$
1,497

Current period provision for expected credit losses
 
5

Write-offs charged against the allowance
 
—

Recoveries
 
—

Allowance for credit losses, end of period
 
$
1,502

1See Note 2. "Adoption of Accounting Pronouncements" for additional information regarding our adoption of ASU 2016-13.



















The following table contains a listing of direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and loss and loss expenses incurred for the periods indicated. For more information concerning reinsurance, refer to Note 8. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” of our 2019 Annual Report.
 
 
Quarter Ended March 31,
($ in thousands)
 
2020
 
2019
Premiums written:
 
 

 
 

Direct
 
$
746,431

 
766,394

Assumed
 
6,043

 
6,555

Ceded
 
(105,147
)
 
(100,002
)
Net
 
$
647,327

 
672,947

Premiums earned:
 
 

 
 

Direct
 
$
754,892

 
728,037

Assumed
 
6,173

 
6,562

Ceded
 
(109,362
)
 
(102,026
)
Net
 
$
651,703

 
632,573

Loss and loss expenses incurred:
 
 

 
 

Direct
 
$
425,795

 
424,657

Assumed
 
4,898

 
5,265

Ceded
 
(30,369
)
 
(43,343
)
Net
 
$
400,324

 
386,579


Direct premiums written decreased in First Quarter 2020 compared to First Quarter 2019 as a result of a $75 million increase in our return audit and mid-term endorsement premium accrual during First Quarter 2020, which reflects lower exposure that determines the premium that we charge due to the economic impacts of the COVID-19 pandemic and the anticipated decline in sales and payroll exposures on the general liability and workers compensation lines of business.

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
 
Quarter Ended March 31,
($ in thousands)
 
2020
 
2019
Ceded premiums written
 
$
(62,087
)
 
(60,013
)
Ceded premiums earned
 
(66,861
)
 
(62,263
)
Ceded loss and loss expenses incurred
 
(5,096
)
 
(13,686
)