Reinsurance

3 Months Ended

Mar. 31, 2025

) REINSURANCE

The Company's catastrophe reinsurance programs are designed primarily by utilizing third-party catastrophe modeling software and consulting with third-party reinsurance experts to project the Company's exposure to catastrophe events. The Company evaluates modeled expected losses developed by the catastrophe modeling software using its risk portfolio data to estimate probable maximum losses ("PML") across multiple return periods and the average annual loss. The Company monitors and manages its catastrophe risk using this model output along with other internal and external data sources, such as its historical loss experience and industry loss experience, to develop its view of catastrophe risk.

The Company's catastrophe reinsurance coverage consists of two separate placements:

1.AmCoastal’s core catastrophe reinsurance program in effect June 1 through May 31, annually, which includes excess of loss and quota share treaties providing coverage for catastrophe losses from named or numbered windstorms; and

2.AmCoastal’s all other perils catastrophe excess of loss agreement in effect January 1 through December 31, annually, which provides protection from catastrophe loss events other than named or numbered windstorms and earthquakes;

This reinsurance protection is an essential part of the Company's catastrophe risk management strategy. It is intended to provide stockholders with an acceptable return on the risks assumed by its insurance entity, and to reduce the variability of earnings, while providing surplus protection. Although reinsurance agreements contractually obligate the Company's reinsurers to reimburse it for the agreed-upon portion of its gross paid losses, they do not discharge the Company's primary liability. In the event one or more of the Company's reinsurers fail to fulfill their obligation, the surplus of the Company's statutory entity may decline, and the Company may not be able to fulfill its obligation to policyholders, or the Company may not be able to maintain compliance with various regulatory financial requirements. Additionally, the Company faces the risk that actual losses incurred from one or more catastrophic events may be above the modeled expected loss, resulting in losses exceeding its reinsurance coverage, which may result in a decline in surplus, and as a result the Company may not be able to fulfill its obligations to policyholders, or the Company may not be able to maintain compliance with various regulatory financial requirements. The details of the Company's programs and the likelihood of a catastrophic event exceeding these three coverages are outlined below.

AmCoastal’s core catastrophe reinsurance program provides occurrence-based coverage up to an exhaustion point of approximately $1,260,000,000 for a first occurrence and $1,610,000,000 in the aggregate. Under this program, the Company's GAAP retention on a first event is $20,500,000 ($10,000,000 retained by AmCoastal under statutory accounting principles (STAT retained), $10,500,000 (retained separately by the Company's captive). The Company has purchased second and third event retrocession coverage, reducing its second and third event GAAP retentions to $13,000,000 ($10,000,000 STAT retained by AmCoastal, $3,000,000 retained separately by the Company's captive). AmCoastal’s program provides sufficient coverage for approximately a 1-in-206-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.5% estimated by equally blending the AIR and RMS catastrophe models using long-term catalogs including demand surge. AmCoastal’s program also provides sufficient coverage for a 1-in-100-year event followed by a 1-in-50-year event in the same treaty year, the probability of which is less than 0.1%.

AmCoastal’s all other perils catastrophe excess of loss agreement provides protection from catastrophe loss events other than named windstorms and earthquakes up to $88,200,000 for a first and second event, totaling $176,400,000 in the aggregate. This agreement provides sufficient coverage for approximately a 1-in-450-year return period, indicating that the probability of a single occurrence exceeding protection purchased is no more than 0.2%.

In addition to the programs described above, AmCoastal purchased a new catastrophe aggregate excess of loss agreement (the “CAT Agg” agreement) to mitigate the Company's catastrophe frequency risk. This agreement provides coverage for in-force, new and renewal business. Effective January 1, 2025, the new CAT Agg agreement provides $40,000,000 of aggregate limit (with a $20,000,000 per occurrence cap) in excess of zero after the $40,000,000 annual aggregate deductible has been exceeded. The CAT Agg agreement limits the Company’s losses from all catastrophe loss events, including named windstorms, severe convective storms and winter storm events for the full year ending December 31, 2025.

Effective December 15, 2023, the Company agreed to commute a private reinsurer’s share of core catastrophe reinsurance coverage and replace this gap in coverage with new coverage provided by one of the Company's other private reinsurers. This transaction resulted in a reduction in expense of approximately $6,300,000 during the three months ended March 31, 2024.

Where management thinks prudent, particularly where premium rates are high relative to the risk, the Company retains risk whereby AmCoastal purchases reinsurance from Shoreline Re, the Company's captive reinsurance entity. Shoreline Re participates on AmCoastal's all other perils catastrophe excess of loss agreement and AmCoastal's excess per risk agreement. In addition, Shoreline Re participates in a 30% quota share agreement with AmCoastal, which provides coverage for all catastrophe perils as well as attritional losses incurred. The table below outlines the participation of Shoreline Re for each program, including premium received and capital at risk.


Treaty	Effective Dates	Premium Collected / Cession Rate	Capital at Risk (1)
All Other Perils Catastrophe Excess of Loss Agreement	01/01/2025 - 01/01/2026	$648,000	$1,152,000
All Other Perils Catastrophe Excess of Loss Agreement	01/01/2024 - 01/01/2025	—	4,500,000
Excess Per Risk Agreement	02/01/2024 - 02/01/2025	1,867,000	633,000
Quota Share Agreement	06/01/2024 - 06/01/2026	30% (2)	$4,200,000 (3)

(1) Capital at risk is calculated by taking the aggregate losses Shoreline Re is subject to under the contract, less net premiums earned under the contract.

(2) This treaty provides or provided coverage for all catastrophe perils and attritional losses incurred. For all catastrophe perils, the quota share agreement provides or provided ground-up protection, effectively reducing the Company's retention for catastrophe losses.

(3) Net premiums earned based on estimated subject premiums at 06/01/2024.

The table below outlines the Company's external quota share agreements in effect for the three months ended March 31, 2025 and 2024.

Reinsurer

Companies in Scope

Effective Dates

Cession Rate

States in Scope

External third-party

AmCoastal

06/01/2024 - 06/01/2026

20% (1)(2)

Florida

External third-party

AmCoastal

06/01/2023 - 06/01/2024

40% (1)

Florida

(1) This treaty provides or provided coverage for all catastrophe perils and attritional losses incurred. For all catastrophe perils, the quota share agreement provides or provided ground-up protection, effectively reducing the Company's retention for catastrophe losses.

(2) The cession rate of this treaty is reduced from 20% to 15% effective 06/01/2025 - 06/01/2026.

Reinsurance recoverable at the balance sheet dates consists of the following:


	March 31,		December 31,
	2025		2024
Reinsurance recoverable on unpaid losses and loss adjustment expenses	$	193,238	$	249,276
Reinsurance recoverable on paid losses and loss adjustment expenses	9,153		14,143
Reinsurance recoverable (1)	$	202,391	$	263,419

(1) The Company's reinsurance recoverable balance is net of its allowance for expected credit losses. More information related to this allowance can be found in Note 13.