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Reinsurance | 9 Months Ended
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Sep. 30, 2013
Insurance [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 September 30, 2013 was approximately $122.8 billion. The Company has reduced the percentage of premiums ceded by UPCIC to its quota share reinsurers to 45% beginning with the reinsurance program effective June 1, 2012, from 50% under the prior year quota share contract effective June 1, 2011 through May 31, 2012. The Company’s two quota share reinsurance contracts were effective June 1, 2013. One quota share reinsurance contract provides coverage to UPCIC through May 31, 2014 and the other provides coverage to UPCIC through May 31, 2015. By ceding 5% less premium to its quota share reinsurers, the Company intends to increase its profitability. The reduction of cession rate also decreases the amount of losses and loss adjustment expenses (“LAE”) 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 September 30, 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 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 for the periods presented (in thousands):
|  | Three Months Ended September 30, 2013 |  |  | Nine Months Ended September 30, 2013 |
|  | Premiums Written |  |  | Premiums Earned |  |  | Loss and Loss Adjustment Expenses |  |  | Premiums Written |  |  | Premiums Earned |  |  | Loss and Loss Adjustment Expenses |
Direct |  | $ | 186,079 |  |  | $ | 199,323 |  |  | $ | 53,600 |  |  | $ | 610,164 |  |  | $ | 590,792 |  |  | $ | 154,547 |
Ceded |  |  | (124,961 | ) |  |  | (130,396 | ) |  |  | (25,265 | ) |  |  | (400,175 | ) |  |  | (389,590 | ) |  |  | (74,529 | )
Net |  | $ | 61,118 |  |  | $ | 68,927 |  |  | $ | 28,335 |  |  | $ | 209,989 |  |  | $ | 201,202 |  |  | $ | 80,018 |
|  | Three Months Ended September 30, 2012 |  |  | Nine Months Ended September 30, 2012 |
|  | Premiums Written |  |  | Premiums Earned |  |  | Loss and Loss Adjustment Expenses |  |  | Premiums Written |  |  | Premiums Earned |  |  | Loss and Loss Adjustment Expenses |
Direct |  | $ | 192,986 |  |  | $ | 191,225 |  |  | $ | 68,286 |  |  | $ | 605,557 |  |  | $ | 556,685 |  |  | $ | 177,425 |
Ceded |  |  | (132,776 | ) |  |  | (131,713 | ) |  |  | (31,985 | ) |  |  | (398,643 | ) |  |  | (392,839 | ) |  |  | (85,513 | )
Net |  | $ | 60,210 |  |  | $ | 59,512 |  |  | $ | 36,301 |  |  | $ | 206,914 |  |  | $ | 163,846 |  |  | $ | 91,912 |
The following prepaid reinsurance premiums and reinsurance recoverable and receivable are reflected in the Condensed Consolidated Balance Sheets as of the periods presented (in thousands):
|  | As of September 30, 2013 |  |  | As of December 31, 2012 |
Prepaid reinsurance premiums |  | $ | 250,506 |  |  | $ | 239,921 |
Reinsurance recoverable on unpaid losses and LAE |  | $ | 63,202 |  |  | $ | 81,415 |
Reinsurance recoverable on paid losses |  |  | 11,698 |  |  |  | 7,776 |
Reinsurance receivable, net |  |  | 24,268 |  |  |  | 24,334 |
Reinsurance recoverable and receivable |  | $ | 99,168 |  |  | $ | 113,525 |

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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 310 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6485557&loc=d3e21549-158491 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 13 -Article 7 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 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27374-158547 Reference 5: 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 6: 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 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 6 -Article 7 Reference 8: 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 9: 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 10: 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 + Details
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