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Reinsurance
 3 Months Ended
Mar. 31, 2012
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 March 31, 2012 was approximately $127.5 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. Deferred ceding commissions are 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 March 31, 2012  
    Premiums
Written		     Premiums
Earned		     Loss and Loss
Adjustment
Expenses		  

Direct

   $ 190,003     $ 178,804     $ 52,607  

Ceded

     (163,434 )      (130,164 )      (26,433 ) 
   

 

 

    

 

 

    

 

 

  

Net

   $ 26,569     $ 48,640     $ 26,174  
   

 

 

    

 

 

    

 

 

  
   
    Three Months Ended March 31, 2011  
    Premiums
Written		     Premiums
Earned		     Loss and Loss
Adjustment
Expenses		  

Direct

   $ 173,175     $ 164,587     $ 53,131  

Ceded

     (123,891 )      (116,583 )      (26,946 ) 
   

 

 

    

 

 

    

 

 

  

Net

   $ 49,284     $ 48,004     $ 26,185  
   

 

 

    

 

 

    

 

 

  

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

 

                 
    As of
March 31, 2012		     As of
December 31, 2011		  

Prepaid reinsurance premiums

   $ 276,365     $ 243,095  
   

 

 

    

 

 

  

Reinsurance recoverable on unpaid losses and LAE

   $ 79,285     $ 88,002  

Reinsurance recoverable on paid losses

     (2,236 )      (2,296 ) 
   

 

 

    

 

 

  

Reinsurance recoverables

   $ 77,049     $ 85,706  
   

 

 

    

 

 

  

Termination of Agreements With Segregated Account T25

Effective January 1, 2012, the agreement between the Insurance Entities and UIH’s Segregated Account T25 – Universal Insurance Holdings of White Rock Insurance (SAC) Ltd. (“T25”) was replaced at identical limits and retentions as the prior agreement with an unaffiliated third-party reinsurer as an open market purchase. Effective January 1, 2012 through May 31, 2012, under an excess catastrophe contract, the Insurance Entities obtained catastrophe coverage of $140.2 million in excess of $44.8 million covering certain loss occurrences including hurricanes. The total cost of this reinsurance coverage is $4.4 million. In the event of a non-hurricane loss subject to this contract, the Insurance Entities will pay to the reinsurer 20.0% of the ultimate net loss ceded to the reinsurer arising out of such non-hurricane loss.