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 1st of each year. The Company’s current reinsurance program consists of catastrophe excess of loss 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 ability of any of its reinsurers to make payments otherwise due to the Company.

Amounts recoverable from reinsurers are estimated in a manner consistent with the terms of 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.

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 June 30, 2017

Due from as of

Standard

and Poor's

Moody's

AM Best

Rating

Investors

June 30,

December 31,

Reinsurer

Company

Services

Service, Inc.

2017

2016

Florida Hurricane Catastrophe Fund (1)

n/a

—

46,364

Total (2)

—

46,364

(1)	No rating is available, because the fund is not rated.

(2)	Amounts represent prepaid reinsurance premiums.

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 June 30,
	2017									2016
							Losses and Loss									Losses and Loss
	Premiums			Premiums			Adjustment			Premiums			Premiums			Adjustment
	Written			Earned			Expenses			Written			Earned			Expenses
Direct	$	296,191		$	244,623		$	85,656		$	271,921		$	226,819		$	58,434
Ceded		(311,338	)		(75,614	)		(5,472	)		(72,874	)		(70,358	)		1,649
Net	$	(15,147	)	$	169,009		$	80,184		$	199,047		$	156,461		$	60,083

	Six Months Ended June 30,
	2017									2016
							Losses and Loss									Losses and Loss
	Premiums			Premiums			Adjustment			Premiums			Premiums			Adjustment
	Written			Earned			Expenses			Written			Earned			Expenses
Direct	$	541,606		$	480,998		$	156,439		$	499,894		$	448,071		$	124,581
Ceded		(311,524	)		(150,430	)		(5,685	)		(146,933	)		(139,162	)		1,619
Net	$	230,082		$	330,568		$	150,754		$	352,961		$	308,909		$	126,200

The following prepaid reinsurance premiums and reinsurance recoverable (payable) and receivable are reflected in the Condensed Consolidated Balance Sheets as of the dates presented (in thousands):

	June 30,		December 31,
	2017		2016
Prepaid reinsurance premiums	$	285,480	$	124,385
Reinsurance recoverable on unpaid losses and LAE	$	1,393	$	106
Reinsurance recoverable (payable) on paid losses		1,318		(1,532	)
Reinsurance receivable, net		—		186
Reinsurance recoverable (payable) and receivable	$	2,711	$	(1,240	)