Note 10 — Reinsurance

The Company cedes a portion of its homeowners’ insurance exposure to other entities under catastrophe excess of loss reinsurance treaties and one quota share agreement. The Company remains liable for claims payments in the event that any reinsurer is unable to meet its obligations under the reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company enters into reinsurance treaties with highly rated and reputable reinsurers and it evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st each year. The Company purchases reinsurance each year taking into consideration probable maximum losses and reinsurance market conditions.

The impact of the reinsurance treaties on premiums written and earned is as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
Premiums Written:
Direct	$	93,282		$	105,787		$	308,682		$	343,927
Assumed		(18	)		(416	)		(377	)		(1,792	)

Gross written		93,264			105,371			308,305			342,135
Ceded		(29,242	)		(41,077	)		(105,998	)		(100,294	)

Net premiums written	$	64,022		$	64,294		$	202,307		$	241,841

Premiums Earned:
Direct	$	92,112		$	93,012		$	283,011		$	263,814
Assumed		430			10,830			3,262			57,360

Gross earned		92,542			103,842			286,273			321,174
Ceded		(29,242	)		(41,077	)		(105,998	)		(100,294	)

Net premiums earned	$	63,300		$	62,765		$	180,275		$	220,880

During the three and nine months ended September 30, 2016 and 2015, there were no recoveries pertaining to reinsurance contracts that were deducted from losses incurred. At September 30, 2016 and December 31, 2015, there were 35 and 21 reinsurers, respectively, participating in the Company’s reinsurance program. There were no amounts receivable with respect to reinsurers at September 30, 2016 and December 31, 2015. Thus, there were no concentrations of credit risk associated with reinsurance receivables as of September 30, 2016 and December 31, 2015. In addition, based on the insurance ratings and the financial strength of the reinsurers, management believes there was no credit risk associated with its reinsurers’ obligations to perform on any prepaid reinsurance contract as of September 30, 2016 and December 31, 2015.

Certain of the reinsurance contracts include retrospective provisions that adjust premiums or increase the amount of future coverage in the event losses are minimal or zero. Effective June 1, 2016, retrospective provisions include premium adjustments only. These adjustments are reflected in the consolidated statements of income as net reductions in ceded premiums of $3,428 and $2,901 for the three months ended September 30, 2016 and 2015, respectively, of which $594 and $336 relates to the Company’s contract with Oxbridge Reinsurance Limited (see Note 17 — Related Party Transactions). For the nine months ended September 30, 2016 and 2015, these adjustments were $9,250 and $15,515, respectively, of which $1,334 and $2,461 relates to the Company’s contract with Oxbridge. In June 2016, the Company received a total of $37,800 in cash benefits related to two retrospective reinsurance contracts that terminated May 31, 2016 of which $7,560 was received from Oxbridge. In September 2016, the Company received the final cash payment of $5,716 under the terms of the remaining retrospective reinsurance contract which terminated May 31, 2016.

At September 30, 2016 and December 31, 2015, other assets included $3,320 and $36,176, respectively, and prepaid reinsurance premiums included $1,214 and $2,625, respectively, which are related to these adjustments. Management believes the credit risk associated with the collectability of these accrued benefits is minimal as the amount receivable is concentrated with one reinsurer and the Company monitors the creditworthiness of this reinsurer based on available information about the reinsurer’s financial position.