XML 48 R17.htm IDEA: XBRL DOCUMENT v3.22.4
Reinsurance
 12 Months Ended
Dec. 31, 2022
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 (proportional) pooling arrangement and other minor reinsurance treaties.
 
As a Standard Commercial Lines and E&S Lines writer, we are subject to the Terrorism Risk Insurance Program Reauthorization Act ("TRIPRA"), which was extended by Congress to December 31, 2027. TRIPRA requires private insurers and the U. S. 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 2023, our deductible, before tax, is approximately $480 million. For losses above the deductible, the federal government will pay 80% of losses to an industry limit of $100 billion, and the insurer retains 20%.

The Insurance Subsidiaries remain liable to policyholders to the extent that any reinsurer becomes unable to meet their contractual obligations. In addition to this direct counterparty credit risk, we have indirect counterparty credit risk as our reinsurers often enter into their own reinsurance programs, or retrocessions, as part of managing their exposure to large losses and improving their financial strength ratings. The credit quality of our reinsurers is also impacted by other factors, such as their reserve adequacy, investment portfolio, regulatory capital position, catastrophe aggregations, and risk management expertise. 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 December 31, 2022 and 2021:

December 31, 2022
($ in thousands)CurrentPast DueTotal Reinsurance Recoverables
Financial strength rating of rated reinsurers
A++$46,282 $1 $46,283 
A+425,395 3,191 428,586 
A106,102 1,315 107,417 
A-7,148 89 7,237 
Total rated reinsurers$584,927 $4,596 $589,523 
Non-rated reinsurers
Federal and state pools$180,794 $— $180,794 
Other than federal and state pools13,678 415 14,093 
Total non-rated reinsurers$194,472 $415 $194,887 
Total reinsurance recoverable, gross$779,399 $5,011 $784,410 
Less: ACL(1,600)
Total reinsurance recoverable, net$782,810 

December 31, 2021
($ in thousands)CurrentPast DueTotal Reinsurance Recoverables
Financial strength rating of rated reinsurers
A++$38,601 $9 $38,610 
A+339,857 1,520 341,377 
A95,675 1,227 96,902 
A-3,209 145 3,354 
Total rated reinsurers$477,342 $2,901 $480,243 
Non-rated reinsurers
Federal and state pools$116,378 $— $116,378 
Other than federal and state pools4,597 450 5,047 
Total non-rated reinsurers$120,975 $450 $121,425 
Total reinsurance recoverable, gross$598,317 $3,351 $601,668 
Less: ACL(1,600)
Total reinsurance recoverable, net$600,068 

The $109.3 million increase in "Total rated reinsurers" as of December 31, 2022, compared to December 31, 2021, was primarily due to reserves recorded for Winter Storm Elliott, which impacted 37 states, 26 of which are in our Standard Commercial Lines footprint. Additionally, the $64.4 million increase in "Federal and state pools" as of December 31, 2022, compared to December 31, 2021, was primarily due to NFIP reserves recorded for flood losses in Florida and surrounding states as a result of Hurricane Ian, which are 100% ceded to the NFIP.

The following table provides a roll forward of the allowance for credit losses on our reinsurance recoverable balance for 2022 and 2021:

($ in thousands)December 31, 2022December 31, 2021
Balance at beginning of year$1,600 $1,777 
Current period change for expected credit losses— (177)
Write-offs charged against the allowance for credit losses— — 
Recoveries— — 
ACL, end of year$1,600 $1,600 

For a discussion of the methodology used to evaluate our estimate of expected credit losses on our reinsurance recoverable balance, refer to Note 2. "Summary of Significant Accounting Policies."
The following table represents our total reinsurance balances segregated by reinsurer to illustrate our concentration of risk throughout our reinsurance portfolio:
 As of December 31, 2022As of December 31, 2021
($ in thousands)Reinsurance Balances% of Reinsurance BalanceReinsurance Balances% of Reinsurance Balance
Total reinsurance recoverables, net of allowance for credit losses$782,810  $600,068  
Total prepaid reinsurance premiums172,371  183,007  
Total reinsurance balance955,181  783,075  
Federal and state pools1:
    
NFIP276,541 29 %223,845 29 %
New Jersey Unsatisfied Claim Judgment Fund45,496 5 49,738 6 
Other3,488 — 2,385 — 
Total federal and state pools325,525 34 275,968 35 
Remaining reinsurance balance$629,656 66 $507,107 65 
Munich Re Group (AM Best rated "A+")$127,106 13 $108,381 14 
Hannover Ruckversicherungs AG (AM Best rated "A+")124,706 13 107,110 14 
AXIS Reinsurance Company (AM Best rated "A")70,957 8 70,814 9 
Swiss Re Group (AM Best rated "A+")36,525 4 29,186 4 
Transatlantic Reinsurance Company (AM Best rated “A+”)32,730 3 26,490 3 
All other reinsurers239,232 25 166,726 21 
   Total reinsurers631,256 66 %508,707 65 %
Less: ACL(1,600)(1,600)
Reinsurers, net of ACL629,656 507,107 
Less: collateral2
(126,167)(128,699)
   Reinsurers, net of collateral$503,489 $378,408 
 1Considered to have minimal risk of default.
2Includes letters of credit, trust funds, and funds held against reinsurance recoverables.

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 lists direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and loss and loss expense incurred for the indicated periods:

($ in thousands)202220212020
Premiums written:   
Direct$4,068,518 3,656,537 3,204,512 
Assumed32,320 22,664 24,288 
Ceded(527,248)(489,488)(455,708)
Net$3,573,590 3,189,713 2,773,092 
Premiums earned:   
Direct$3,880,522 3,472,715 3,108,687 
Assumed30,742 21,550 25,010 
Ceded(537,884)(477,012)(451,883)
Net$3,373,380 3,017,253 2,681,814 
Loss and loss expense incurred:   
Direct$2,537,638 2,096,512 1,822,034 
Assumed23,160 13,813 17,201 
Ceded(449,020)(296,341)(203,412)
Net$2,111,778 1,813,984 1,635,823 
Ceded premiums written, ceded premiums earned, and ceded loss and loss expense 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 ($ in thousands)202220212020
Ceded premiums written$(259,246)(284,311)(274,042)
Ceded premiums earned(274,100)(274,384)(271,598)
Ceded loss and loss expense incurred(200,467)(215,224)(78,993)