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Catastrophe Reinsurance | 12 Months Ended
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Dec. 31, 2021
Reinsurance Disclosures [Abstract] |
Catastrophe Reinsurance | CATASTROPHE REINSURANCE Catastrophes and natural disasters are inherent risks of the property and casualty insurance business. These catastrophic events and natural disasters include, without limitation, hurricanes, tornadoes, earthquakes, hailstorms, wildfires, high winds and winter storms. Such events result in insured losses that are, and will continue to be, a material factor in the results of operations and financial position of the Company’s property and casualty insurance companies. Further, because the level of these insured losses occurring in any one year cannot be accurately predicted, these losses may contribute to material year-to-year fluctuations in the results of operations and financial position of these companies. Specific types of catastrophic events are more likely to occur at certain times within the year than others. This factor adds an element of seasonality to property and casualty insurance claims. The Company has adopted the industry-wide catastrophe classifications of storms and other events promulgated by the Insurance Services Office (“ISO”) to track and report losses related to catastrophes. ISO classifies a disaster as a catastrophe when the event causes $25.0 million or more in direct insured losses to property and affects a significant number of policyholders and insurers. ISO-classified catastrophes are assigned a unique serial number recognized throughout the insurance industry. The discussions that follow utilize ISO’s definition of catastrophes. The Company manages its exposure to catastrophes and other natural disasters through a combination of geographical diversification, restrictions on the amount and location of new business production in certain regions, and reinsurance. To limit its exposures to catastrophic events, the Company maintains a catastrophe reinsurance program for the property and casualty insurance companies. In 2021, the property business written through the Life & Health segment was included in the catastrophe reinsurance program. Coverage for the catastrophe reinsurance program is provided in various layers through multiple excess of loss reinsurance contracts and an annual aggregate excess property catastrophe reinsurance contract. Coverage on individual catastrophes provided under the excess of loss reinsurance contracts effective January 1, 2021 to December 31, 2021 is provided in various layers as presented below.
DOLLARS IN MILLIONS |  | Catastrophe Losses and LAE |  | Percentage of Coverage
In Excess of |  | Up to |
Retained |  | $ | — |  |  | $ | 50.0 |  |  | — | %
1st Layer of Coverage |  | 50.0 |  |  | 150.0 |  |  | 95.0 |
2nd Layer of Coverage |  | 150.0 |  |  | 250.0 |  |  | 95.0 |
3rd Layer of Coverage |  | 250.0 |  |  | 275.0 |  |  | 95.0 |
Coverage on individual catastrophes provided under the excess of loss reinsurance contracts effective January 1, 2020 to December 31, 2020 is provided in various layers as presented below.
DOLLARS IN MILLIONS |  | Catastrophe Losses and LAE |  | Percentage of Coverage
In Excess of |  | Up to |
Retained |  | $ | — |  |  | $ | 50.0 |  |  | — | %
1st Layer of Coverage |  | 50.0 |  |  | 150.0 |  |  | 95.0 |
2nd Layer of Coverage |  | 150.0 |  |  | 250.0 |  |  | 95.0 |
3rd Layer of Coverage |  | 250.0 |  |  | 275.0 |  |  | 95.0 |
Coverage on individual catastrophes provided under the excess of loss reinsurance contracts effective January 1, 2019 to December 31, 2019 is provided in various layers as presented below.
DOLLARS IN MILLIONS |  | Catastrophe Losses and LAE |  | Percentage of Coverage
In Excess of |  | Up to |
Retained |  | $ | — |  |  | $ | 50.0 |  |  | — | %
1st Layer of Coverage |  | 50.0 |  |  | 150.0 |  |  | 95.0 |
2nd Layer of Coverage |  | 150.0 |  |  | 250.0 |  |  | 95.0 |
3rd Layer of Coverage |  | 250.0 |  |  | 275.0 |  |  | 95.0 |
In the event that the incurred catastrophe losses and LAE covered by the catastrophe reinsurance programs presented in the three preceding tables exceed the retention for that particular layer, each of the programs allow for one reinstatement of such NOTE 21. CATASTROPHE REINSURANCE (Continued) coverage. In such an instance, the Company is required to pay a reinstatement premium to the reinsurers to reinstate the full amount of reinsurance available under such layer. Coverage provided under the 2021 aggregate property catastrophe reinsurance contract is summarized below.
|  | Aggregate Catastrophe Losses and LAE
DOLLARS IN MILLIONS |  | In Excess of |  | Up to
Retained |  | $ | — |  |  | $ | 60.0 |
Coverage |  | 60.0 |  |  | 110.0 |
Coverage provided under the 2020 aggregate property catastrophe reinsurance contract is summarized below.
|  | Aggregate Catastrophe Losses and LAE
DOLLARS IN MILLIONS |  | In Excess of |  | Up to
Retained |  | $ | — |  |  | $ | 60.0 |
Coverage |  | 60.0 |  |  | 110.0 |
The catastrophe reinsurance in 2021, 2020 and 2019 for the property and casualty insurance companies also included reinsurance coverage from the Florida Hurricane Catastrophe Fund (the “FHCF”) for hurricane losses in Florida at retentions lower than those described above. The Life & Health Insurance segment also purchases reinsurance from the FHCF for hurricane losses in Florida. Reinsurance premiums for the Company’s catastrophe reinsurance programs and the FHCF Program reduced earned premiums for the years ended December 31, 2021, 2020 and 2019 by the following:
DOLLARS IN MILLIONS |  | 2021 |  | 2020 |  | 2019
Specialty Property & Casualty Insurance |  | $ | 7.0 |  |  | $ | 4.8 |  |  | $ | 0.2 |
Preferred Property & Casualty Insurance |  | 22.0 |  |  | 20.7 |  |  | 20.2 |
Life & Health Insurance |  | 1.3 |  |  | 1.2 |  |  | 0.1 |
Total Ceded Catastrophe Reinsurance Premiums |  | $ | 30.3 |  |  | $ | 26.7 |  |  | $ | 20.5 |
The Company did not pay any reinstatement premiums in 2021, 2020, or 2019. Catastrophe losses and LAE (including reserve development), net of reinsurance recoveries, for the years ended December 31, 2021, 2020 and 2019 by business segment are presented below.
DOLLARS IN MILLIONS |  | 2021 |  | 2020 |  | 2019
Specialty Property & Casualty Insurance |  | $ | 16.0 |  |  | $ | 12.5 |  |  | $ | 11.6 |
Preferred Property & Casualty Insurance |  | 73.5 |  |  | 81.5 |  |  | 44.6 |
Life & Health Insurance |  | 12.9 |  |  | 12.9 |  |  | 3.9 |
Total Catastrophe Losses and LAE |  | $ | 102.4 |  |  | $ | 106.9 |  |  | $ | 60.1 |
The Company had no material recoveries under its catastrophe reinsurance treaties for the years ended December 31, 2021 and 2020. Total prior year catastrophe loss and LAE reserves, net of reinsurance recoverables, developed favorably by $5.4 million in 2021, adversely by $0.2 million in 2020 and favorably by $17.1 million in 2019. The Specialty Property & Casualty Insurance segment reported adverse catastrophe reserve development of $0.3 million, $0.2 million, and $0.5 million in 2021, 2020 and 2019, respectively. The Preferred Property & Casualty Insurance segment reported favorable catastrophe reserve development of $5.6 million, $0.5 million and $18.4 million in 2021, 2020 and 2019, respectively. The Life & Health Insurance segment reported favorable catastrophe reserve development of $0.1 million in 2021 and adverse development of $0.5 million and $0.8 million in 2020 and 2019, respectively. NOTE 21. CATASTROPHE REINSURANCE (Continued) The process of estimating and establishing reserves for catastrophe losses is inherently uncertain and the actual ultimate cost of a claim, net of actual reinsurance recoveries, may vary materially from the estimated amount reserved. The Company’s estimates of direct catastrophe losses are generally based on inspections by claims adjusters and historical loss development experience for areas that have not been inspected or for claims that have not yet been reported. The Company’s estimates of direct catastrophe losses are based on the coverages provided by its insurance policies. The Company’s homeowners and dwelling insurance policies do not provide coverage for losses caused by floods, but generally provide coverage for physical damage caused by wind or wind-driven rain. Accordingly, the Company’s estimates of direct losses for homeowners and dwelling insurance do not include losses caused by flood. Depending on the policy, automobile insurance may provide coverage for losses caused by flood. Estimates of the number and severity of claims ultimately reported are influenced by many variables, including, but not limited to, repair or reconstruction costs and determination of cause of loss that are difficult to quantify and will influence the final amount of claim settlements. All these factors, coupled with the impact of the availability of labor and material on costs, require significant judgment in the reserve setting process. A change in any one or more of these factors is likely to result in an ultimate net claim cost different from the estimated reserve. The Company’s estimates of indirect losses from wind pools and joint underwriting associations are based on a variety of factors, including, but not limited to, actual or estimated assessments provided by or received from such entities, insurance industry estimates of losses, and estimates of the Company’s market share in the assessable states. Actual assessments may differ materially from these estimated amounts. OTHER REINSURANCE In addition to the reinsurance programs described in Note 21, “Catastrophe Reinsurance,” to the Consolidated Financial Statements, Kemper’s insurance subsidiaries utilize other reinsurance arrangements to limit their maximum loss, provide greater diversification of risk and to minimize exposures on larger risks. The ceding of insurance does not discharge the primary liability of the original insurer. Accordingly, insurance reserve liabilities are reported gross of any estimated recovery from reinsurers in the Consolidated Balance Sheets. Amounts recoverable from reinsurers are estimated in a manner consistent with the insurance reserve liability and are included in Other Receivables in the Consolidated Balance Sheets. Earned Premiums ceded on long-duration and short-duration policies were $36.1 million, $31.2 million and $27.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, of which $30.3 million, $26.7 million and $20.5 million, respectively, was related to catastrophe reinsurance. See Note 21, “Catastrophe Reinsurance,” to the Consolidated Financial Statements for additional information regarding the Company’s catastrophe reinsurance programs. Certain insurance subsidiaries assume business from other insurance companies and involuntary pools. Earned Premiums assumed on long-duration and short-duration policies were $56.7 million, $73.8 million and $92.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. Trinity and Capitol County Mutual Fire Insurance Company (“Capitol”) are parties to a quota share reinsurance agreement whereby Trinity assumes 100% of the business written by Capitol, subject to a cap, for ceded losses for dwelling coverage. Earned Premiums assumed by Trinity from Capitol were $17.3 million, $18.1 million and $19.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. Capitol is a mutual insurance company and, accordingly, is owned by its policyholders. Trinity and Old Reliable Casualty Company (“ORCC”), a subsidiary of Capitol, are parties to a quota share reinsurance agreement whereby Trinity assumes 100% of the business written by ORCC, subject to a cap, for ceded losses for dwelling coverage. Earned Premiums assumed by Trinity from ORCC were $4.7 million, $4.9 million and $5.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. Six employees of the Company serve as directors of Capitol’s six member board of directors. Nine employees of the Company also serve as directors of ORCC’s nine member board of directors. Kemper’s subsidiary, United Insurance, provides claims and administrative services to Capitol and ORCC. In addition, agents appointed by Kemper’s subsidiary, The Reliable Life Insurance Company, and who are employed by United Insurance, are also appointed by Capitol and ORCC to sell property insurance products for the Company’s Life & Health Insurance segment. The Company also provides certain investment services to Capitol and ORCC.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -URI http://asc.fasb.org/topic&trid=2303980 + Details
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