XML 22 R9.htm IDEA: XBRL DOCUMENT v2.3.0.15
Reinsurance
9 Months Ended
Sep. 30, 2011
Reinsurance and Insurance Operations [Abstract] 
Reinsurance
4. Reinsurance

UPCIC seeks to reduce its risk of loss by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers, generally, as of the beginning of the hurricane season on June 1 of each year. UPCIC’s reinsurance program consists of excess of loss, quota share and catastrophe reinsurance, subject to the terms and conditions of the applicable agreements. UPCIC is responsible for insured losses related to catastrophes and other events in excess of coverage provided by its reinsurance program. UPCIC also remains responsible for the settlement of insured losses notwithstanding the failure of any of its reinsurers to make payments otherwise due to UPCIC.

 

UPCIC’s in-force policyholder coverage for windstorm exposures as of September 30, 2011, was approximately $129.2 billion.

Amounts recoverable from reinsurers are estimated in a manner consistent with the reinsurance contracts. Reinsurance premiums, losses and loss adjustment expenses (“LAE”) are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Reinsurance ceding commissions received are deferred and netted against policy acquisition costs and amortized over the effective period of the related insurance policies.

The Company’s reinsurance arrangements had the following effect on certain items in the Condensed Consolidated Statements of Income (in thousands):

 

                                                 
    Three Months Ended September 30, 2011     Three Months Ended September 30, 2010  
    Premiums
Written		     Premiums
Earned		     Loss and Loss
Adjustment
Expenses		     Premiums
Written		     Premiums
Earned		     Loss and Loss
Adjustment
Expenses		  

Direct

   $ 171,370     $ 175,858     $ 59,789     $ 152,662     $ 162,093     $ 59,512  

Ceded

     (123,984 )      (126,224 )      (30,446 )      (108,539 )      (113,262 )      (30,142 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net

   $ 47,386     $ 49,634     $ 29,343     $ 44,123     $ 48,831     $ 29,370  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
     
    Nine Months Ended September 30, 2011     Nine Months Ended September 30, 2010  
    Premiums
Written		     Premiums
Earned		     Loss and Loss
Adjustment
Expenses		     Premiums
Written		     Premiums
Earned		     Loss and Loss
Adjustment
Expenses		  

Direct

   $ 558,024     $ 510,579     $ 166,280     $ 520,782     $ 452,848     $ 156,537  

Ceded

     (393,673 )      (363,417 )      (84,900 )      (357,411 )      (329,342 )      (78,680 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net

   $ 164,351     $ 147,162     $ 81,380     $ 163,371     $ 123,506     $ 77,857  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following prepaid reinsurance premiums and reinsurance recoverables are reflected in the Condensed Consolidated Balance Sheets (in thousands):

 

                 
    As of
September 30,
2011		     As of
December 31,
2010		  

Prepaid reinsurance premiums

   $ 251,342     $ 221,086  
   

 

 

    

 

 

  

Reinsurance recoverable on unpaid losses and LAE

   $ 76,659     $ 79,114  

Reinsurance recoverable on paid losses

     886       438  
   

 

 

    

 

 

  

Reinsurance recoverables

   $ 77,545     $ 79,552  
   

 

 

    

 

 

  

Segregated Account T25

The Company owns and maintains a segregated account, Segregated Account T25 - Universal Insurance Holdings of White Rock Insurance (SAC) Ltd. (“T25”) established by a third-party reinsurer in accordance with Bermuda law. T25 enters into underlying excess catastrophe contracts with UPCIC for the purpose of assuming the risk of certain policies issued by UPCIC, covering certain loss occurrences including hurricanes. The Company secures the obligations of T25 to UPCIC under these contracts by contributing the amount of T25’s liability for losses, net of UPCIC’s required premium payments, to a trust account as collateral. The collateral will be used to pay any claims that may arise in the event of the occurrence of covered events. Transactions related to this arrangement are eliminated in consolidation, however, and the amount of collateral is held in trust for the benefit of UPCIC until the occurrence of a covered event, expiration or termination of the agreement between T25 and UPCIC.

On May 31, 2011, T25 and UPCIC mutually agreed to a Commutation and Settlement Agreement related to the underlying Property Catastrophe Excess of Loss Reinsurance Contract that was effective January 1, 2011. A replacement contract was entered into between the parties on June 1, 2011, as part of UPCIC’s reinsurance program in effect for the period June 1, 2011, through May 31, 2012. In conjunction with entering into the replacement contract, the Company contributed additional funds to T25 due to the increased reinsurance coverage and collateral requirements. The amount of collateral in the trust account at September 30, 2011, was $63.0 million.