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Reinsurance | 6 Months Ended
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Jun. 30, 2012
Reinsurance/Insurance Operations [Abstract] |
Reinsurance |
4. | Reinsurance
The Company 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. The Company’s reinsurance program consists of excess of loss, quota share and catastrophe reinsurance, subject to the terms and conditions of the applicable agreements. The Company is responsible for insured losses related to catastrophes and other events in excess of coverage provided by its reinsurance program. The Company also remains responsible for the settlement of insured losses notwithstanding the failure of any of its reinsurers to make payments otherwise due to the Company. The Company’s in-force policyholder coverage for windstorm exposures as of June 30, 2012 was approximately $126.2 billion. The Company has reduced the percentage of premiums ceded by UPCIC to its quota share reinsurer to 45% under the reinsurance program which became effective June 1, 2012, from 50% under the prior year quota share contract effective June 1, 2011 through May 31, 2012. The Company’s intent is to increase its profitability over the contract term by ceding 5% less premium to its quota share reinsurer. This reduction of cession rate also decreases the amount of losses and loss adjustment expenses that may be ceded by UPCIC and effectively increases the amount of risk retained by UPCIC and the Company. The reduction of cession rate also reduces the amount of ceding commissions earned from the Company’s quota share reinsurer during the contract term and decreases the amount of deferred ceding commission, as of June 30, 2012, that is a component of net deferred policy acquisition costs. 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 June 30, 2012 |  |  | Six Months Ended June 30, 2012 |
|  | Premiums Written |  |  | Premiums Earned |  |  | Loss and Loss Adjustment Expenses |  |  | Premiums Written |  |  | Premiums Earned |  |  | Loss and Loss Adjustment Expenses |
Direct |  | $ | 222,568 |  |  | $ | 186,656 |  |  | $ | 56,533 |  |  | $ | 412,571 |  |  | $ | 365,460 |  |  | $ | 109,140 |
Ceded |  |  | (102,433 | ) |  |  | (130,962 | ) |  |  | (27,096 | ) |  |  | (265,867 | ) |  |  | (261,126 | ) |  |  | (53,529 | )
Net |  | $ | 120,135 |  |  | $ | 55,694 |  |  | $ | 29,437 |  |  | $ | 146,704 |  |  | $ | 104,334 |  |  | $ | 55,611 |
|  | Three Months Ended June 30, 2011 |  |  | Six Months Ended June 30, 2011 |
|  | Premiums Written |  |  | Premiums Earned |  |  | Loss and Loss Adjustment Expenses |  |  | Premiums Written |  |  | Premiums Earned |  |  | Loss and Loss Adjustment Expenses |
Direct |  | $ | 213,479 |  |  | $ | 170,134 |  |  | $ | 53,360 |  |  | $ | 386,654 |  |  | $ | 334,721 |  |  | $ | 106,491 |
Ceded |  |  | (145,798 | ) |  |  | (120,610 | ) |  |  | (27,508 | ) |  |  | (269,689 | ) |  |  | (237,193 | ) |  |  | (54,454 | )
Net |  | $ | 67,681 |  |  | $ | 49,524 |  |  | $ | 25,852 |  |  | $ | 116,965 |  |  | $ | 97,528 |  |  | $ | 52,037 |
The following prepaid reinsurance premiums and reinsurance recoverables and receivables are reflected in the Condensed Consolidated Balance Sheets (in thousands):
|  | As of |  |  | As of |
|  | June 30, 2012 |  |  | December 31, 2011 |
Prepaid reinsurance premiums |  | $ | 247,835 |  |  | $ | 243,095 |
Reinsurance recoverable on unpaid losses and LAE |  | $ | 73,169 |  |  | $ | 88,002 |
Reinsurance recoverable on paid losses |  |  | 42,290 |  |  |  | (2,296 | )
Reinsurance receivables, net |  |  | 125,664 |  |  |  | 55,205 |
Reinsurance recoverables and receivables |  | $ | 241,123 |  |  | $ | 140,911 |

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27374-158547 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 310 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6485557&loc=d3e21549-158491 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27261-158547 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6588590&loc=d3e27703-158548 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 6 -Article 7 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6811-158387 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 13 -URI http://asc.fasb.org/extlink&oid=6588590&loc=d3e27795-158548 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 113 -Paragraph 27 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03.6,13) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 113 -Paragraph 120 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 13 -Article 7 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6816-158387 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 92-5 -Paragraph 19 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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