Reinsurance

12 Months Ended

Dec. 31, 2022

11.

Reinsurance

The Company cedes risk to unrelated reinsurers on a pro rata (“quota share”) and excess of loss basis in the ordinary course of business to limit its net loss exposure on insurance contracts. Reinsurance ceded arrangements do not discharge the Company of primary liability. Moreover, reinsurers may fail to pay the Company due to a lack of reinsurer liquidity, perceived improper underwriting, and losses for risks that are excluded from reinsurance coverage and other similar factors, all of which could adversely affect the Company’s financial results.

The Company had the following reinsurance balances as of December 31, 2022 and 2021:


(Dollars in thousands)	December 31, 2022			December 31, 2021
Reinsurance receivables, net	$	85,721		$	99,864
Collateral securing reinsurance receivables		(8,937	)		(9,855	)
Reinsurance receivables, net of collateral	$	76,784		$	90,009
Allowance for expected credit losses	$	8,992		$	8,992
Prepaid reinsurance premiums		17,421			53,494

As of December 31, 2022, the Company had one aggregate unsecured reinsurance receivables that exceeded 3% of shareholders’ equity from the following reinsurer. Unsecured reinsurance receivables include amounts receivable for paid and unpaid losses and loss adjustment expenses, less amounts secured by collateral.


(Dollars in thousands)	Reinsurance Receivables		AM Best Ratings (As of December 31, 2022)
Munich Re America Corporation	$	45,246	A+

The effect of reinsurance on premiums written and earned is as follows:


(Dollars in thousands)	Written			Earned
For the year ended December 31, 2022:
Direct business	$	573,412		$	589,131
Reinsurance assumed		154,191			135,896
Reinsurance ceded		(136,272	)		(122,556	)
Net premiums	$	591,331		$	602,471
For the year ended December 31, 2021:
Direct business	$	584,467		$	578,171
Reinsurance assumed		97,655			78,880
Reinsurance ceded		(102,054	)		(61,441	)
Net premiums	$	580,068		$	595,610
For the year ended December 31, 2020:
Direct business	$	554,617		$	560,658
Reinsurance assumed		51,986			69,312
Reinsurance ceded		(58,436	)		(62,271	)
Net premiums	$	548,167		$	567,699

Ceded losses and loss adjustment expenses incurred were $48.7 million, $34.9 million, and $61.8 million for the years ended December 31, 2022, 2021, and 2020, respectively.