Reinsurance

9 Months Ended

Sep. 30, 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 September 30, 2021, and December 31, 2020:


	September 30, 2021
($ in thousands)	Current		Past Due		Total Reinsurance Recoverables
Financial strength rating of rated reinsurers
A++	$	39,325	$	13	$	39,338
A+	338,912		887		339,799
A	96,071		439		96,510
A-	3,166		271		3,437
B++	—		—		—
B+	—		—		—
Total rated reinsurers	$	477,474	$	1,610	$	479,084

Non-rated reinsurers
Federal and state pools	$	204,001	$	—	$	204,001
Other than federal and state pools	4,698		29		4,727
Total non-rated reinsurers	$	208,699	$	29	$	208,728

Total reinsurance recoverable, gross	$	686,173	$	1,639	$	687,812
Less: allowance for credit losses1					(1,595)
Total reinsurance recoverable, net					$	686,217


	December 31, 2020
($ in thousands)	Current		Past Due		Total Reinsurance Recoverables
Financial strength rating of rated reinsurers
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 losses1					(1,777)
Total reinsurance recoverable, net					$	587,492

1Represents our current expectation of credit losses on total current and past due reinsurance recoverables, and is not identifiable by reinsurer.

The $98.7 million increase in "Total reinsurance recoverable, net," was primarily driven by losses ceded to the NFIP due to seasonal catastrophic storms, mainly Hurricane Ida, and subsequent flooding. See below for further discussion on ceded premiums written, ceded premiums earned, and ceded loss and loss expenses incurred related to our participation in the NFIP.

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 September 30,			Nine Months ended September 30,
	2021		2020	2021		2020
Balance at beginning of period	$	1,777	2,396	$	1,777	4,400
Cumulative effect adjustment1	—		—	—		(2,903)
Balance at beginning of period, as adjusted	$	1,777	2,396	$	1,777	1,497
Current period provision for expected credit losses	(182)		(565)	(182)		334

Write-offs charged against the allowance for credit losses	—		—	—		—
Recoveries	—		—	—		—
Allowance for credit losses, end of period	$	1,595	1,831	$	1,595	1,831

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 September 30,			Nine Months ended September 30,
($ in thousands)	2021		2020	2021		2020
Premiums written:
Direct	$	932,752	839,275	$	2,796,296	2,420,350
Assumed	7,136		5,450	17,541		17,902
Ceded	(126,982)		(125,217)	(369,548)		(346,665)
Net	$	812,906	719,508	$	2,444,289	2,091,587
Premiums earned:
Direct	$	877,620	803,957	$	2,568,445	2,292,495
Assumed	6,304		6,147	16,391		18,375
Ceded	(116,677)		(115,563)	(352,111)		(333,955)
Net	$	767,247	694,541	$	2,232,725	1,976,915
Loss and loss expenses incurred:
Direct	$	655,483	530,192	$	1,557,063	1,407,000
Assumed	4,143		4,232	10,807		13,430
Ceded	(154,357)		(86,622)	(227,577)		(168,355)
Net	$	505,269	447,802	$	1,340,293	1,252,075

Direct premiums written ("DPW") increased $375.9 million, or 16%, in Nine Months 2021 compared to Nine Months 2020 from (i) overall renewal pure price increases, (ii) strong retention, and (iii) new business growth. This increase included four percentage points from the $75 million return audit and endorsement premium accrual that was recorded in the first quarter of 2020 and a $19.7 million premium credit to automobile policyholders in the second quarter of 2020.

The return audit and endorsement premium accrual recorded in 2020 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 in 2020.

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 NFIP flood premiums, losses, and loss expenses, were as follows:


Ceded to NFIP	Quarter ended September 30,			Nine Months ended September 30,
($ in thousands)	2021		2020	2021		2020
Ceded premiums written	$	(77,697)	(77,318)	$	(218,520)	(213,592)
Ceded premiums earned	(69,197)		(68,427)	(203,549)		(202,656)
Ceded loss and loss expenses incurred	(153,713)		(48,132)	(174,861)		(66,219)

The i