Reinsurance

9 Months Ended

Sep. 30, 2020

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. Notwithstanding the purchase of such reinsurance, the Company is responsible for certain retained loss amounts before reinsurance attaches and for 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 September 30, 2020			Due from as of
Reinsurer	AM Best Company	Standard and Poor’s Rating Services, Inc.	Moody’s Investors Service, Inc.	September 30, 2020		December 31, 2019
Florida Hurricane Catastrophe Fund (1)	n/a	n/a	n/a	$	65,883	$	199,647
Allianz Risk Transfer	—	—	—	—		19,269


Total (2)				$	65,883	$	218,916

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

(2)Amounts represent prepaid reinsurance premiums 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,
	2020						2019
	Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses		Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses
Direct	$	409,418	$	357,208	$	347,207	$	342,872	$	313,065	$	334,440
Ceded	(3,062)		(123,017)		(108,730)		(4,781)		(106,466)		(201,869)
Net	$	406,356	$	234,191	$	238,477	$	338,091	$	206,599	$	132,571



	Nine Months Ended September 30,
	2020						2019
	Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses		Premiums Written		Premiums Earned		Losses and Loss Adjustment Expenses
Direct	$	1,148,656	$	1,020,798	$	682,896	$	990,066	$	911,550	$	663,768
Ceded	(497,263)		(339,408)		(158,026)		(422,414)		(284,867)		(304,807)
Net	$	651,393	$	681,390	$	524,870	$	567,652	$	626,683	$	358,961

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,
	2020		2019
Prepaid reinsurance premiums	$	333,062	$	175,208
Reinsurance recoverable on paid losses and LAE	$	35,749	$	70,015
Reinsurance recoverable on unpaid losses and LAE	59,329		123,221

Reinsurance recoverable	$	95,078	$	193,236