Reinsurance

ProAssurance purchases reinsurance from third-party reinsurers and insurance enterprises in order to reduce its net exposure to losses. ProAssurance also uses reinsurance arrangements as a mechanism for sharing risk with insureds or their affiliates.

The effect of reinsurance on premiums written and earned was as follows:



(In thousands)	2015 Premiums						2014 Premiums						2013 Premiums
	Written			Earned			Written			Earned			Written			Earned
Direct	$	780,982		$	772,968		$	761,043		$	755,623		$	566,745		$	568,629
Assumed	31,236			22,691			18,566			12,987			802			804
Ceded	(102,933		)	(101,510		)	(77,760		)	(68,879		)	(42,365		)	(41,514		)
Net premiums	$	709,285		$	694,149		$	701,849		$	699,731		$	525,182		$	527,919

The receivable from reinsurers on unpaid losses and loss adjustment expenses represents Management’s estimate of amounts that will be recoverable under ProAssurance reinsurance agreements. Most Company reinsurance agreements base the amount of premium that is due to the reinsurer in part on losses reimbursed or to be reimbursed under the agreement, and terms may also include maximum and minimum amounts of ceded premium. Ceded premium amounts are estimated based on Management’s expectation of ultimate losses and the portion of those losses that are allocable to reinsurers according to the terms of the agreements, including any minimums or maximums. Given the uncertainty of the ultimate amounts of losses, Management’s estimates of losses and related amounts recoverable may vary significantly from the eventual outcome. During the years ended December 31, 2015, 2014 and 2013 ProAssurance reduced premiums ceded by $1.1 million, $15.7 million and $16.4 million, respectively, due to changes in Management’s estimates of amounts due to reinsurers related to prior accident year loss recoveries.

Reinsurance contracts do not relieve ProAssurance from its obligations to policyholders and ProAssurance remains liable to its policyholders whether or not reinsurers honor their contractual obligations. ProAssurance continually monitors its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies.

At December 31, 2015, the net total amounts due from reinsurers was $262.5 million (including receivables related to paid and unpaid losses and LAE and prepaid reinsurance premiums, less reinsurance premiums payable). No one reinsurer had an individual balance which exceeded $25 million.

At December 31, 2015 reinsurance recoverables totaling approximately $47.0 million were collateralized by letters of credit or funds withheld. ProAssurance had no allowance for credit losses related to its reinsurance receivables at December 31, 2015 or 2014 as all reinsurance balances were considered collectible. During the years ended December 31, 2015, 2014 and 2013 no reinsurance balances were written off for credit reasons.

There were no significant reinsurance commutations in 2015, 2014 or 2013.