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Reinsurance
 3 Months Ended
Mar. 31, 2013
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 in the event of the failure of any of its reinsurers to make payments otherwise due to the Company. The estimated insured value of the Company’s in-force policyholder coverage for windstorm exposures as of March 31, 2013 was approximately $126.9 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 March 31, 2013, 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 Consolidated Statements of Income for the periods presented (in thousands):

 

                         
    Three Months Ended March 31, 2013  
    Premiums
Written		     Premiums
Earned		     Loss and Loss
Adjustment
Expenses		  

Direct

   $ 204,139     $ 194,168     $ 50,596  

Ceded

     (141,317 )      (128,759 )      (24,113 ) 
   

 

 

    

 

 

    

 

 

  

Net

   $ 62,822     $ 65,409     $ 26,483  
   

 

 

    

 

 

    

 

 

  

 

                         
    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  
   

 

 

    

 

 

    

 

 

  

The following prepaid reinsurance premiums and reinsurance recoverables and receivable are reflected in the Consolidated Balance Sheets as of the periods presented (in thousands):

 

                 
    As of
March 31, 2013		     As of
December 31, 2012		  

Prepaid reinsurance premiums

   $ 252,479     $ 239,921  
   

 

 

    

 

 

  
     

Reinsurance recoverable on unpaid losses and LAE

   $ 75,680     $ 81,415  

Reinsurance recoverable on paid losses

     11,551       7,776  

Reinsurance receivable, net

     4,480       24,334  
   

 

 

    

 

 

  

Reinsurance recoverable and receivable

   $ 91,711     $ 113,525