Reinsurance

9 Months Ended

Sep. 30, 2019

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 programs consist principally of catastrophe excess of loss reinsurance, subject to the terms and conditions of the applicable agreements. The Company is responsible for certain retained loss amounts before reinsurance attaches and insured losses related to catastrophes and other events that exceed coverage provided by the reinsurance programs. The Company remains responsible for the settlement of insured losses irrespective of whether any of the reinsurers fail to make payments otherwise due.

Amounts recoverable from reinsurers are estimated in a manner consistent with the provisions of the reinsurance agreements and consistent with the establishment of the gross liability for losses, loss adjustment expenses (“LAE”) and other expenses. 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.

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 reinsurers whose aggregate balances exceeded 3% of the Company’s stockholders’ equity as of the dates presented (in thousands):

Ratings as of September 30, 2019

Due from as of

Reinsurer

AM Best

Company

Standard

and Poor’s

Rating

Services, Inc.

Moody’s

Investors Service, Inc.

September 30, 2019

December 31, 2018

Florida Hurricane Catastrophe Fund (1)

n/a

123,037

165,022

Allianz Risk Transfer

A+

Aa3

28,088

139,565

Renaissance Reinsurance Ltd

n/a

—

39,459

Chubb Tempest Reinsurance Ltd

n/a

—

16,208

Total (2)

151,125

360,254


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


(2)	Amounts represent prepaid reinsurance premiums, reinsurance receivables and net recoverables for paid and unpaid losses, including incurred but not reported reserves, and loss adjustment expenses.

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,
	2019									2018
	Premiums Written			Premiums Earned			Losses and Loss Adjustment Expenses			Premiums Written			Premiums Earned			Losses and Loss Adjustment Expenses
Direct	$	342,872		$	313,065		$	334,440		$	309,176		$	288,404		$	270,158
Ceded	(4,781		)	(106,466		)	(201,869		)	(17,256		)	(99,466		)	(184,211		)
Net	$	338,091		$	206,599		$	132,571		$	291,920		$	188,938		$	85,947



	Nine Months Ended September 30,
	2019									2018
	Premiums Written			Premiums Earned			Losses and Loss Adjustment Expenses			Premiums Written			Premiums Earned			Losses and Loss Adjustment Expenses
Direct	$	990,066		$	911,550		$	663,768		$	921,941		$	824,692		$	593,419
Ceded	(422,414		)	(284,867		)	(304,807		)	(356,507		)	(260,905		)	(341,704		)
Net	$	567,652		$	626,683		$	358,961		$	565,434		$	563,787		$	251,715

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



	September 30,		December 31,
	2019		2018
Prepaid reinsurance premiums	$	280,297	$	142,750
Reinsurance recoverable on paid losses and LAE	$	106,988	$	25,238
Reinsurance recoverable on unpaid losses and LAE	110,313		393,365
Reinsurance recoverable	$	217,301	$	418,603