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Reinsurance | 9 Months Ended
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Sep. 30, 2025
Reinsurance Disclosures [Abstract] |
Reinsurance | 9) REINSU RANCE 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, including catastrophe bonds (effective April 2024 and December 2024), 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 two coverages are outlined below. AmCoastal’s core catastrophe reinsurance program provides occurrence-based coverage up to an exhaustion point of approximately $1,330,000,000 for a first occurrence and $1,676,000,000 in the aggregate. Under this program, the Company's GAAP retention on a first event is $29,750,000 ($14,000,000 retained by AmCoastal under statutory accounting principles (STAT retained), $15,750,000 (retained separately by the Company's captive). The Company has purchased second and third event retrocession coverage, reducing its second event GAAP retention to $18,500,000 ($14,000,000 STAT retained by AmCoastal, $4,500,000 retained separately by the Company's captive) and third event GAAP retention to $3,750,000, based on three $100,000,000 loss events. AmCoastal’s program provides sufficient coverage for approximate ly a 1-in-203-year return period, indicating that the probability of a single occurrence exceeding protection purchased is roughly 0.5% estimated by equally blen ding the AIR 10, AIR 11.5, RMS 22, and RMS 23 catastrophe models using long-term catalogs including demand surge and based on total insured value at September 30, 2025 of $69 billion. 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 coverage (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 met. 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 and $15,700,000 during the three and six months ended June 30, 2024, respectively. 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 45% 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) |  |
Quota Share Agreement |  | 06/01/2025 - 06/01/2026 |  | 45% (2) |  |  | $ | 33,346,000 |  | (3)
All Other Perils Catastrophe |  | 01/01/2025 - |  |  |  |  |  |  |
Excess of Loss Agreement |  | 12/31/2025 |  | $ | 1,296,000 |  |  |  | 2,304,000 |  |
All Other Perils Catastrophe |  | 01/01/2024 - |  |  |  |  |  |  |
Excess of Loss Agreement |  | 01/01/2025 |  |  | — |  |  |  | 4,500,000 |  | (4)
Excess Per Risk Agreement |  | 02/01/2024 - 02/01/2025 |  |  | 1,867,000 |  |  |  | 633,000 |  |
Quota Share Agreement (5) |  | 06/01/2024 - 06/01/2026 |  | 30% (2) |  |  | $ | 4,200,000 |  | (6)
(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 our retention for catastrophe losses. (3) Net premiums earned based on estimated subject premiums at June 1, 2025. (4) This treaty was amended on June 1, 2025 to include reinstatement, resulting in additional premium and aggregate losses. (5) This treaty was commuted on June 1, 2025 with no impact on our consolidated results. (6) Net premiums earned based on estimated subject premiums at June 1, 2024. The table below outlines the Company's external quota share agreements in effect for the nine months ended September 30, 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 was reduced from 20% to 15% effective June 1, 2025 to June 1, 2026. Reinsurance recoverable at the balance sheet dates consists of the following:
|  | September 30, 2025 |  |  | December 31, 2024 |
Reinsurance recoverable on unpaid losses and loss adjustment expenses |  | $ | 137,632 |  |  | $ | 249,276 |
Reinsurance recoverable on paid losses and loss adjustment expenses |  |  | 6,629 |  |  |  | 14,143 |
Reinsurance recoverable(1) |  | $ | 144,261 |  |  | $ | 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.

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