XML 33 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
Reinsurance And Catastrophes
 12 Months Ended
Dec. 31, 2011
Reinsurance And Catastrophes [Abstract]  
Reinsurance And Catastrophes

NOTE 10 - Reinsurance and Catastrophes

In the normal course of business, the Company's insurance subsidiaries assume and cede reinsurance with other insurers. Reinsurance is ceded primarily to limit losses from large exposures and to permit recovery of a portion of direct losses; however, such a transfer does not relieve the originating insurance company of contingent liability.

The Company is a national underwriter and therefore has exposure to catastrophic losses in certain coastal states and other regions throughout the U.S. Catastrophes can be caused by various events including hurricanes, windstorms, earthquakes, hail, severe winter weather and wildfires, and the frequency and severity of catastrophes are inherently unpredictable. The financial impact from catastrophic losses results from both the total amount of insured exposure in the area affected by the catastrophe as well as the severity of the event. The Company seeks to reduce its exposure to catastrophe losses through the geographic diversification of its insurance coverage, deductibles, maximum coverage limits and the purchase of catastrophe reinsurance.

The Company's net catastrophe losses incurred of approximately $86,000 for the year ended December 31, 2011 reflected losses primarily from wind/hail/tornado events in the spring and summer months, as well as from Hurricane Irene. The Company's net catastrophe losses incurred of approximately $49,189 for the year ended December 31, 2010 reflected losses primarily from wind/hail/tornado events throughout the year. The Company's net catastrophe losses incurred of approximately $33,065 for the year ended December 31, 2009 reflected losses primarily from wind/hail/tornado events in the spring and summer months.

The total amounts of reinsurance recoverable on unpaid insurance reserves classified as assets and reported in Other Assets in the Consolidated Balance Sheets were as follows:

 

     December 31,  
     2011        2010  

Reinsurance recoverables on reserves and unpaid claims

        

Property and casualty

        

Reinsurance companies

    $ 8,913         $ 10,074   

State insurance facilities

      2,550           2,151   

Life and health

      9,722           8,232   
  

 

 

       

 

 

  

Total

    $ 21,185         $ 20,457   
  

 

 

       

 

 

  

The Company recognizes the cost of reinsurance premiums over the contract periods for such premiums in proportion to the insurance protection provided. Amounts recoverable from reinsurers for unpaid claims and claim expenses, including estimated amounts for unsettled claims, claims incurred but not yet reported and policy benefits, are estimated in a manner consistent with the insurance liability associated with the policy. The effects of reinsurance on premiums written and contract deposits; premiums and contract charges earned; and benefits, claims and settlement expenses were as follows:

 

            Ceded to      Assumed         
     Gross      Other      from Other      Net  
     Amount      Companies      Companies      Amount  

Year ended December 31, 2011

            

Premiums written and contract deposits

    $ 1,106,012       $ 31,271       $ 3,708       $ 1,078,449   

Premiums and contract charges earned

      695,262         31,940         3,796         667,118   

Benefits, claims and settlement expenses

      519,942         20,767         3,266         502,441   

Year ended December 31, 2010

            

Premiums written and contract deposits

      1,082,100         35,035         4,896         1,051,961   

Premiums and contract charges earned

      702,927         35,057         4,805         672,675   

Benefits, claims and settlement expenses

      479,719         8,934         4,051         474,836   

Year ended December 31, 2009

            

Premiums written and contract deposits

      1,034,654         35,104         4,103         1,003,653   

Premiums and contract charges earned

      690,631         35,169         4,128         659,590   

Benefits, claims and settlement expenses

      467,088         12,152         3,724         458,660   

There were no losses from uncollectible reinsurance recoverables in the three years ended December 31, 2011. Past due reinsurance recoverables as of December 31, 2011 were not material.

The Company maintains catastrophe excess of loss reinsurance coverage. For 2011, the Company's catastrophe excess of loss coverage consisted of three contracts in addition to the Florida Hurricane Catastrophe Fund ("FHCF"). The first and second contracts worked together to provide the primary coverage ("first event"), providing 95% coverage of catastrophe losses above a retention of $20,000 per occurrence up to $175,000 per occurrence. These contracts consisted of five layers, each of which provided for one mandatory reinstatement. The layers were $5,000 excess of $20,000, $25,000 excess of $25,000, $40,000 excess of $50,000, $65,000 excess of $90,000, and $20,000 excess of $155,000. The final contract was a third excess of loss contract ("third event"), providing 95% coverage of catastrophe losses above a retention of $15,000 per occurrence up to $25,000 per occurrence, after the Company retained $20,000 of losses above $15,000 per occurrence and less than $25,000 per occurrence. The third excess of loss contract did not provide for a reinstatement. In addition, the Company's predominant insurance subsidiary for property and casualty business written in Florida reinsured 90% of hurricane losses in that state above an estimated retention of $6,400 up to $22,700, based on the FHCF's financial resources. The FHCF contract is a one-year contract, effective June 1, 2011.

For liability coverages, in 2011 the Company reinsured each loss above a retention of $750 up to $2,500 per occurrence and $20,000 in a clash event. (A clash cover is a reinsurance casualty excess contract requiring two or more casualty coverages or policies issued by the Company to be involved in the same loss occurrence for coverage to apply.) For property coverages, in 2011 the Company reinsured each loss above a retention of $750 up to $2,500 on a per risk basis, including catastrophe losses that in the aggregate were less than the retention levels above. Also, the Company could submit to the reinsurers three per risk losses from the same occurrence for a total of $5,250 of property recovery in any one event.

The maximum individual life insurance risk retained by the Company is $200 on any individual life, while either $100 or $125 is retained on each group life policy depending on the type of coverage. Excess amounts are reinsured. The Company also maintains a life catastrophe reinsurance program. The Company reinsured 100% of the catastrophe risk in excess of $1,000 up to $25,000 per occurrence, with one reinstatement in 2011. The Company's life catastrophe risk reinsurance program covers acts of terrorism and includes nuclear, biological and chemical explosions but excludes other acts of war.