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Reinsurance | 12 Months Ended
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Dec. 31, 2014
Insurance [Abstract] |
Reinsurance | NOTE 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 remains responsible for the settlement of insured losses irrespective of the failure of any of its reinsurers to make payments otherwise due to the Company. The Company reduced the percentage of premiums ceded by UPCIC to its quota share reinsurers to 30% beginning with the reinsurance program effective June 1, 2014, from 45% under the prior year quota share contracts that were effective June 1, 2013 through May 31, 2014. By ceding 15 percentage points less premium to its quota share reinsurers, the Company expects to increase its profitability by retaining more premium. The reduction in cession rate also decreases the amount of losses and 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 December 31, 2014, that is a component of net deferred policy acquisition costs. The following table presents quota-share cession rates by reinsurance program and the years they were in effect:
Reinsurance Program |  | Cession Rate |
June 2011 - May 2012 |  |  | 50% |
June 2012 - May 2013 |  |  | 45% |
June 2013 - May 2014 |  |  | 45% |
June 2014 - May 2015 |  |  | 30% |
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 deferred policy acquisition costs and amortized over the effective period of the related insurance policies. In order to reduce credit risk for amounts due from reinsurers, the Insurance Entities seek to do business with financially sound reinsurance companies and regularly evaluate the financial strength of all reinsurers used. The following table presents ratings from rating agencies and the unsecured amounts due from the Company’s reinsurers whose aggregate balance exceeded 3% of the Company’s stockholders’ equity as of the dates presented (in thousands):
|  | Ratings as of December 31, 2014 |  |  |
|  |  |  | Standard |  |  |  |  |  |  |  |  |  |
|  |  |  | and Poor's |  | Moody's |  | Due from as of |
|  | AM Best |  | Rating |  | Investors |  | December 31, |
Reinsurer |  | Company |  | Services |  | Service, Inc. |  | 2014 |  |  | 2013 |
Everest Reinsurance Company |  | A+ |  | A+ |  | A1 |  | $ | 16,780 |  |  | $ | 87,789 |
Florida Hurricane Catastrophe Fund |  | n/a |  | n/a |  | n/a |  |  | 31,870 |  |  |  | 33,593 |
Odyssey Reinsurance Company |  | A |  | A- |  | A3 |  |  | 136,339 |  |  |  | 142,190 |
Total (1) |  |  |  |  |  |  |  | $ | 184,989 |  |  | $ | 263,572 |
(1) | Amounts represent prepaid reinsurance premiums, reinsurance receivables, and net recoverables for paid and unpaid losses, including incurred but not reported reserves, loss adjustment expenses, and offsetting reinsurance payables.
n/a | No rating available, because entity is not rated.
The Company’s reinsurance arrangements had the following effect on certain items in the Consolidated Statements of Income for the periods presented (in thousands):
|  | For the year ended December 31, 2014 |
|  |  |  |  |  |  |  |  |  | Losses and Loss |
|  | Premiums |  |  | Premiums |  |  | Adjustment |
|  | Written |  |  | Earned |  |  | Expenses |
Direct |  | $ | 789,577 |  |  | $ | 777,317 |  |  | $ | 199,181 |
Ceded |  |  | (399,730 | ) |  |  | (450,440 | ) |  |  | (75,906 | )
Net |  | $ | 389,847 |  |  | $ | 326,877 |  |  | $ | 123,275 |
|  | For the year ended December 31, 2013 |
|  |  |  |  |  |  |  |  |  | Losses and Loss |
|  | Premiums |  |  | Premiums |  |  | Adjustment |
|  | Written |  |  | Earned |  |  | Expenses |
Direct |  | $ | 783,894 |  |  | $ | 788,477 |  |  | $ | 216,852 |
Ceded |  |  | (522,116 | ) |  |  | (520,822 | ) |  |  | (108,237 | )
Net |  | $ | 261,778 |  |  | $ | 267,655 |  |  | $ | 108,615 |
|  | For the year ended December 31, 2012 |
|  |  |  |  |  |  |  |  |  | Losses and Loss |
|  | Premiums |  |  | Premiums |  |  | Adjustment |
|  | Written |  |  | Earned |  |  | Expenses |
Direct |  | $ | 780,128 |  |  | $ | 751,899 |  |  | $ | 249,064 |
Ceded |  |  | (517,604 | ) |  |  | (520,779 | ) |  |  | (122,877 | )
Net |  | $ | 262,524 |  |  | $ | 231,120 |  |  | $ | 126,187 |
The following prepaid reinsurance premiums and reinsurance recoverable and receivable are reflected in the Consolidated Balance Sheets as of the dates presented (in thousands):
|  | As of December 31, |
|  | 2014 |  |  | 2013 |
Prepaid reinsurance premiums |  | $ | 190,505 |  |  | $ | 241,214 |
Reinsurance recoverable on unpaid losses and LAE |  | $ | 47,350 |  |  | $ | 68,584 |
Reinsurance recoverable on paid losses |  |  | 7,837 |  |  |  | 39,263 |
Reinsurance receivable, net |  |  | 7,468 |  |  |  | 203 |
Reinsurance recoverable and receivable |  | $ | 62,655 |  |  | $ | 108,050 |

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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=34714010&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=34714010&loc=d3e27703-158548 + Details
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