Reinsurance

12 Months Ended

Dec. 31, 2019

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 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 contracts and consistent with the establishment of the gross liability for losses, 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 balance exceeded 3% of the Company’s stockholders’ equity as of the dates presented (in thousands):



	Ratings as of December 31, 2019
		Standard
	AM Best	and Poor’s Rating	Moody’s Investors	Due from as of December 31,
Reinsurer	Company	Services, Inc.	Service, Inc.	2019		2018
Florida Hurricane Catastrophe Fund (1)	n/a	n/a	n/a	$	199,647	$	165,022
Allianz Risk Transfer	A+	AA	Aa3	19,269		139,565
Renaissance Reinsurance Ltd	—	—	—	—		39,459
Chubb Tempest Reinsurance Ltd	—	—	—	—		16,208
Total (2)				$	218,916	$	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, loss adjustment expenses, and offsetting reinsurance payables.

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, 2019
	Premiums Written			Premiums Earned			Losses and Loss Adjustment Expenses
Direct	$	1,292,721		$	1,233,121		$	1,084,604
Ceded	(423,076		)	(390,619		)	(481,198		)
Net	$	869,645		$	842,502		$	603,406



	For the Year Ended December 31, 2018
	Premiums Written			Premiums Earned			Losses and Loss Adjustment Expenses
Direct	$	1,190,875		$	1,121,640		$	1,325,323
Ceded	(363,201		)	(353,258		)	(910,868		)
Net	$	827,674		$	768,382		$	414,455



	For the Year Ended December 31, 2017
	Premiums Written			Premiums Earned			Losses and Loss Adjustment Expenses
Direct	$	1,055,886		$	999,198		$	779,122
Ceded	(318,826		)	(310,405		)	(428,694		)
Net	$	737,060		$	688,793		$	350,428

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



	As of December 31,
	2019		2018
Prepaid reinsurance premiums	$	175,208	$	142,750
Reinsurance recoverable on paid losses and LAE	$	70,015	$	25,238
Reinsurance recoverable on unpaid losses and LAE	123,221		393,365
Reinsurance recoverable	$	193,236	$	418,603