Reinsurance

3 Months Ended

Mar. 31, 2021

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 tables provide (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, 2021, and December 31, 2020:


	March 31, 2021
($ in thousands)	Current		Past Due		Total Reinsurance Recoverables
Financial strength rating of rated reinsurers1
A++	$	37,939	$	108	$	38,047
A+	352,386		4,032		356,418
A	105,068		387		105,455
A-	2,177		—		2,177
B++	117		264		381
B+	—		—		—
Total rated reinsurers	$	497,687	$	4,791	$	502,478

Non-rated reinsurers
Federal and state pools	$	76,179	$	—	$	76,179
Other than federal and state pools	3,179		860		4,039
Total non-rated reinsurers	$	79,358	$	860	$	80,218

Total reinsurance recoverable, gross	$	577,045	$	5,651	$	582,696
Less: allowance for credit losses2					(1,840)
Total reinsurance recoverable, net					$	580,856

1Credit ratings as of March 31, 2021.

2Represents our current expectation of credit losses on total current and past due reinsurance recoverables, and is not identifiable by reinsurer.


	December 31, 2020
($ in thousands)	Current		Past Due		Total Reinsurance Recoverables
Financial strength rating of rated reinsurers1
A++	$	37,464	$	102	$	37,566
A+	354,846		2,452		357,298
A	105,652		415		106,067
A-	2,139		—		2,139
B++	56		324		380
B+	—		—		—
Total rated reinsurers	$	500,157	$	3,293	$	503,450

Non-rated reinsurers
Federal and state pools	$	82,575	$	—	$	82,575
Other than federal and state pools	2,676		568		3,244
Total non-rated reinsurers	$	85,251	$	568	$	85,819

Total reinsurance recoverable, gross	$	585,408	$	3,861	$	589,269
Less: allowance for credit losses2					(1,777)
Total reinsurance recoverable, net					$	587,492

For a discussion of the methodology used to evaluate our estimate of expected credit losses, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2020 Annual Report.

The following table provides a rollforward of the allowance for credit losses on our reinsurance recoverable balance for the periods indicated:


($ in thousands)	Quarter ended March 31,
	2021		2020
Balance at beginning of period	$	1,777	$	4,400
Cumulative effect adjustment1	—		(2,903)
Balance at beginning of period, as adjusted	$	1,777	$	1,497
Current period provision for expected credit losses	63		5

Write-offs charged against the allowance for credit losses	—		—
Recoveries	—		—
Allowance for credit losses, end of period	$	1,840	1,502

1Represents the impact of our adoption of ASU 2016-13, Financial Instruments - Credit Losses.

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 about reinsurance, refer to Note 9. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” of our 2020 Annual Report.


	Quarter ended March 31,
($ in thousands)	2021		2020
Premiums written:
Direct	$	908,774	746,431
Assumed	5,533		6,043
Ceded	(116,129)		(105,147)
Net	$	798,178	647,327
Premiums earned:
Direct	$	837,369	754,892
Assumed	5,676		6,173
Ceded	(118,085)		(109,362)
Net	$	724,960	651,703
Loss and loss expenses incurred:
Direct	$	441,507	425,795
Assumed	3,447		4,898
Ceded	(31,553)		(30,369)
Net	$	413,401	400,324

Direct premiums written ("DPW") increased $162 million, or 22%, in First Quarter 2021 compared to First Quarter 2020. The increase included 11 percentage points from the $75 million return audit and mid-term endorsement premium accrual that was recorded in First Quarter 2020, resulting in remaining growth of $87 million in First Quarter 2021. This accrual reflected lower exposure levels, which determine the premium we charge, attributable 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 written, ceded premiums earned, and ceded loss and loss expenses incurred related to our participation in the NFIP, to which we cede 100% of our flood premiums, losses, and loss expenses, were as follows:


Ceded to NFIP	Quarter ended March 31,
($ in thousands)	2021		2020
Ceded premiums written	$	(65,742)	(62,087)
Ceded premiums earned	(67,519)		(66,861)
Ceded loss and loss expenses incurred	(2,207)		(5,096)