XML 72 R13.htm IDEA: XBRL DOCUMENT
v3.20.1

7. Reinsurance | 12 Months Ended
--- | ---
Dec. 31, 2019
Reinsurance Disclosures [Abstract] |
7. Reinsurance | Through June 30, 2019, the Company’s quota share reinsurance treaties were on a July 1 through June 30 fiscal year basis. Effective December 15, 2019, the Company entered into a quota share reinsurance treaty for its personal lines business, which primarily consists of homeowners’ policies, covering the period from December 15, 2019 through December 31, 2020 (“2019/2020”) Treaty. In addition to the 2019/2020 Treaty, the Company’s quota share reinsurance treaties in effect during the years ended December, 2019 and 2018 for its personal lines business were covered under a treaty covering a two-year period from July 1, 2017 through June 30, 2019 (“2017/2019 Treaty”). The treaty in effect during the year ended December 31, 2019 was covered under the July 1, 2018 through June 30, 2019 treaty year (“2018/2019 Treaty Year”). The treaties in effect during the year ended December 31, 2018 were covered under the July 1, 2017 through June 30, 2018 treaty year (“2017/2018 Treaty Year”) and the 2018/2019 Treaty Year that began on July 1, 2018. In August 2018, the Company terminated its contract with one of the reinsurers that was a party to the 2017/2019 Treaty. This termination was retroactive to July 1, 2018 and had the effect of reducing the quota share ceding rate to 10% under the 2018/2019 Treaty Year from 20% under the 2017/2018 Treaty Year. Effective July 1, 2019, the 2017/2019 Treaty and commercial umbrella treaty expired on a run-off basis; these treaties were not renewed. The Company entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2019. Material terms for reinsurance treaties in effect for the treaty years shown below are as follows:
| Treaty Year
| December 15, 2019 |  | July 1, 2019 |  | July 1, 2018 |  | July 1, 2017
| to |  | to |  | to |  | to
Line of Business | December 31, 2020 |  | December 14, 2019 |  | June 30, 2019 |  | June 30, 2018
Personal Lines: |  |  |  |  |  |  |
Homeowners, dwelling fire and |  |  |  |  |  |  |
and canine legal liability |  |  |  |  |  |  |
Quota share treaty: |  |  |  |  |  |  |
Percent ceded | 25% |  | None |  | 10% |  | 20%
|  | Treaty Year |
|  | December 15, 2019 |  |  | July 1, 2019 |  |  | July 1, 2018 |  |  | July 1, 2017 |
|  | to |  |  | to |  |  | to |  |  | to |
Line of Business |  | June 30, 2020 |  |  | December 14, 2019 |  |  | June 30, 2019 |  |  | June 30, 2018 |
Personal Lines: |  |  |  |  |  |  |  |  |  |  |  |
Homeowners, dwelling fire and |  |  |  |  |  |  |  |  |  |  |  |
and canine legal liability |  |  |  |  |  |  |  |  |  |  |  |
Quota share treaty: |  |  |  |  |  |  |  |  |  |  |  |
Risk retained on intial $1,000,000 |  |  |  |  |  |  |  |  |  |  |  |
of losses |  | $ | 750,000 |  |  | $ | 1,000,000 |  |  | $ | 900,000 |  |  | $ | 800,000 |
Losses per occurrence subject to |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
quota share reinsurance coverage |  | $ | 1,000,000 |  |  | None |  |  | $ | 1,000,000 |  |  | $ | 1,000,000 |
Excess of loss coverage and facultative |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
facility coverage (1) |  | $ | 9,000,000 |  |  | $ | 9,000,000 |  |  | $ | 9,000,000 |  |  | $ | 9,000,000 |
|  |  | in excess of |  |  | in excess of |  |  | in excess of |  |  | in excess of |
|  | $ | 1,000,000 |  |  | $ | 1,000,000 |  |  | $ | 1,000,000 |  |  | $ | 1,000,000 |
Total reinsurance coverage per occurrence |  | $ | 9,250,000 |  |  | $ | 9,000,000 |  |  | $ | 9,100,000 |  |  | $ | 9,200,000 |
Losses per occurrence subject to |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
reinsurance coverage |  | $ | 10,000,000 |  |  | $ | 10,000,000 |  |  | $ | 10,000,000 |  |  | $ | 10,000,000 |
Expiration date |  |  | June 30, 2020 |  |  | June 30, 2020 |  |  | June 30, 2019 |  |  | June 30, 2018 |
Catastrophe Reinsurance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Initial loss subject to personal lines |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
quota share treaty |  | $ | 7,500,000 |  |  | None |  |  | $ | 5,000,000 |  |  | $ | 5,000,000 |
Risk retained per catastrophe |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
occurrence (2) |  | $ | 5,625,000 |  |  | $ | 7,500,000 |  |  | $ | 4,500,000 |  |  | $ | 4,000,000 |
Catastrophe loss coverage in excess of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
quota share coverage (3) |  | $ | 602,500,000 |  |  | $ | 602,500,000 |  |  | $ | 445,000,000 |  |  | $ | 315,000,000 |
Reinstatement premium |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
protection (4) (5) (6) |  |  | Yes |  |  | Yes |  |  | Yes |  |  | Yes |
(1) | For personal lines, includes the addition of an automatic facultative facility allowing KICO to obtain homeowners single risk coverage up to $10,000,000 in total insured value, which covers direct losses from $3,500,000 to $10,000,000.
(2) | Plus losses in excess of catastrophe coverage.
(3) | Catastrophe coverage is limited on an annual basis to two times the per occurrence amounts. Duration of 168 consecutive hours for a catastrophe occurrence from windstorm, hail, tornado, hurricane and cyclone.
(4) | Effective July 1, 2017, reinstatement premium protection for $145,000,000 of catastrophe coverage in excess of $5,000,000.
(5) | Effective July 1, 2018, reinstatement premium protection for $210,000,000 of catastrophe coverage in excess of $5,000,000.
(6) | Effective July 1, 2019, reinstatement premium protection for $292,500,000 of catastrophe coverage in excess of $7,500,000.
|  | Treaty Year |
|  | July 1, 2019 |  |  | July 1, 2018 |  |  | July 1, 2017 |
|  | to |  |  | to |  |  | to |
Line of Business |  | June 30, 2020 |  |  | June 30, 2019 |  |  | June 30, 2018 |
Personal Lines: |  |  |  |  |  |  |  |  |
Personal Umbrella |  |  |  |  |  |  |  |  |
Quota share treaty: |  |  |  |  |  |  |  |  |
Percent ceded - first $1,000,000 of coverage |  |  | 90 | % |  |  | 90 | % |  |  | 90 | %
Percent ceded - excess of $1,000,000 dollars of coverage |  |  | 100 | % |  |  | 100 | % |  |  | 100 | %
Risk retained |  | $ | 100,000 |  |  | $ | 100,000 |  |  | $ | 100,000 |
Total reinsurance coverage per occurrence |  | $ | 4,900,000 |  |  | $ | 4,900,000 |  |  | $ | 4,900,000 |
Losses per occurrence subject to quota share reinsurance coverage |  | $ | 5,000,000 |  |  | $ | 5,000,000 |  |  | $ | 5,000,000 |
Expiration date |  |  | June 30, 2020 |  |  | June 30, 2019 |  |  | June 30, 2018 |
Commercial Lines: |  |  |  |  |  |  |  |  |  |  |  |
General liability commercial policies |  |  |  |  |  |  |  |  |  |  |  |
Quota share treaty |  |  | None |  |  | None |  |  | None |
Risk retained |  | $ | 750,000 |  |  | $ | 750,000 |  |  | $ | 750,000 |
Excess of loss coverage above risk retained |  | $ | 3,750,000 |  |  | $ | 3,750,000 |  |  | $ | 3,750,000 |
|  |  | in excess of |  |  |  | in excess of |  |  |  | in excess of |
|  | $ | 750,000 |  |  | $ | 750,000 |  |  | $ | 750,000 |
Total reinsurance coverage per occurrence |  | $ | 3,750,000 |  |  | $ | 3,750,000 |  |  | $ | 3,750,000 |
Losses per occurrence subject to reinsurance coverage |  | $ | 4,500,000 |  |  | $ | 4,500,000 |  |  | $ | 4,500,000 |
Commercial Umbrella |  |  |  |  |  |  |  |  |  |  |  |
Quota share treaty: |  |  | None |  |  |  |  |  |  |  |  |
Percent ceded - first $1,000,000 of coverage |  |  |  |  |  |  | 90 | % |  |  | 90 | %
Percent ceded - excess of $1,000,000 of coverage |  |  |  |  |  |  | 100 | % |  |  | 100 | %
Risk retained |  |  |  |  |  | $ | 100,000 |  |  | $ | 100,000 |
Total reinsurance coverage per occurrence |  |  |  |  |  | $ | 4,900,000 |  |  | $ | 4,900,000 |
Losses per occurrence subject to quota share reinsurance coverage |  |  |  |  |  | $ | 5,000,000 |  |  | $ | 5,000,000 |
Expiration date |  |  |  |  |  | June 30, 2019 |  |  | June 30, 2018 |
The Company’s reinsurance program has been structured to enable the Company to grow its premium volume while maintaining regulatory capital and other financial ratios generally within or below the expected ranges used for regulatory oversight purposes. The reinsurance program also provides income as a result of ceding commissions earned pursuant to the quota share reinsurance contracts. The Company’s participation in reinsurance arrangements does not relieve the Company of its obligations to policyholders. Approximate reinsurance recoverables on unpaid and paid losses by reinsurer at December 31, 2019 and 2018 are as follows:
|  | Unpaid |  |  | Paid |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Losses |  |  | Losses |  |  | Total |  |  | Security |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cavello Bay Reinsurance Limited (1) |  | $ | 4,036 |  |  | $ | 2,427 |  |  | $ | 6,463 |  |  | $ | 5,995 |  |  |  | (2 | )
Swiss Reinsurance America Corporation |  |  | 4,418 |  |  |  | 1,336 |  |  |  | 5,754 |  |  |  | - |  |  |  |  |
Hanover Rueck SE |  |  | 3,156 |  |  |  | 522 |  |  |  | 3,678 |  |  |  | - |  |  |  |  |
SCOR Reinsurance Company |  |  | 394 |  |  |  | 458 |  |  |  | 852 |  |  |  | - |  |  |  |  |
Allied World Assurance Company |  |  | 760 |  |  |  | 170 |  |  |  | 930 |  |  |  | - |  |  |  |  |
Others |  |  | 2,964 |  |  |  | 471 |  |  |  | 3,435 |  |  |  | - |  |  |  |  |
Total |  | $ | 15,728 |  |  | $ | 5,384 |  |  | $ | 21,113 |  |  | $ | 5,995 |  |  |  |  |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cavello Bay Reinsurance Limited (1) |  | $ | 5,319 |  |  | $ | 1,277 |  |  | $ | 6,596 |  |  | $ | 7,548 |  |  |  | (2 | )
Swiss Reinsurance America Corporation |  |  | 4,499 |  |  |  | 1,251 |  |  |  | 5,750 |  |  |  | - |  |  |  |  |
Hanover Rueck SE |  |  | 2,728 |  |  |  | 1,181 |  |  |  | 3,909 |  |  |  | - |  |  |  |  |
SCOR Reinsurance Company |  |  | 528 |  |  |  | 89 |  |  |  | 617 |  |  |  | - |  |  |  |  |
Allied World Assurance Company |  |  | 306 |  |  |  | 373 |  |  |  | 679 |  |  |  | - |  |  |  |  |
Others |  |  | 2,291 |  |  |  | 282 |  |  |  | 2,573 |  |  |  | 58 |  |  |  | (3 | )
Total |  | $ | 15,671 |  |  | $ | 4,453 |  |  | $ | 20,125 |  |  | $ | 7,606 |  |  |  |  |
(Columns in the tables above may not sum to totals due to rounding) (1) On December 27, 2018, Enstar Group Limited announced that one of its wholly owned subsidiaries, Cavello Bay Reinsurance Limited acquired Maiden Reinsurance North America, Inc. (2) Secured pursuant to collateralized trust agreements. (3) Represents $53,000 secured pursuant to collateralized trust agreement and $5,000 guaranteed by an irrevocable letter of credit. Assets held in the trusts referred to in footnotes (2) and (3) in the table above are not included in the Company’s invested assets and investment income earned on these assets is credited to the reinsurers respectively. In addition to reinsurance recoverables on unpaid and paid losses, reinsurance receivables in the accompanying consolidated balance sheets as of December 31, 2019 and 2018 include unearned ceded premiums of approximately $19,638,000 and $6,243,000, respectively. Ceding Commission Revenue The Company earns ceding commission revenue under its quota share reinsurance agreements based on: (i) a fixed provisional commission rate at which provisional ceding commissions are earned, and (ii) a sliding scale of commission rates and ultimate treaty year loss ratios on the policies reinsured under each of these agreements based upon which contingent ceding commissions are earned. The sliding scale includes minimum and maximum commission rates in relation to specified ultimate loss ratios. The commission rate and contingent ceding commissions earned increases when the estimated ultimate loss ratio decreases and, conversely, the commission rate and contingent ceding commissions earned decreases when the estimated ultimate loss ratio increases. The Company’s estimated ultimate treaty year loss ratios (the “Loss Ratio(s)”) for treaties in effect during the year ended December 31, 2019 are attributable to contracts under: (1) the 2017/2019 Treaty for the 2018/2019 Treaty Year, which expired on June 30, 2019 and was not renewed, and (2) the 2019/20 Treaty. The Loss Ratios for treaties in effect for the year ended December 31, 2018 are attributable to contracts under the 2017/2019 Treaty for both the 2017/2018 Treaty Year and the 2018/2019 Treaty Year. Treaties in effect for the year ended December 31, 2019 Under the 2019/2020 Treaty, the Company receives an upfront fixed provisional rate that is not subject to a sliding scale contingent adjustment. Under the 2017/2019 Treaty, the Company received an upfront fixed provisional rate that was only subject to a sliding scale contingent adjustment based upon Loss Ratio for the 2017/2018 Treaty Year (“Loss Period”). Under this arrangement, the Company earned provisional ceding commissions that were subject to later adjustment dependent on changes to the estimated Loss Period Loss Ratio for the 2017/2019 Treaty. The Company’s Loss Period Loss Ratios attributable to the 2017/2019 Treaty reached the maximum contractual level during the six months ended June 30, 2018, and therefore no contingent commission adjustment was recorded for the year ended December 31, 2019. Treaty in effect for the year ended December 31, 2018 Under the 2017/2019 Treaty, the Company received an upfront fixed provisional rate that was only subject to a sliding scale contingent adjustment based upon Loss Ratio for the 2017/2018 Treaty Year (“Loss Period”). For the year ended December 31, 2018, the Company incurred negative contingent ceding commissions as a result of the Loss Period Loss Ratio for the 2017/2019 Treaty, which reduced contingent ceding commissions earned. In addition to the treaties that were in effect during the years ended December 31, 2019 and 2018, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods increase or decrease, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. Ceding commission revenues earned consists of the following:
|  | Years ended |
|  | December 31, |
|  | 2019 |  |  | 2018 |
Provisional ceding commissions earned |  | $ | 5,446,370 |  |  | $ | 6,745,928 |
Contingent ceding commissions earned |  |  | (795,519 | ) |  |  | (1,413,298 | )
|  | $ | 4,650,851 |  |  | $ | 5,332,630 |
Provisional ceding commissions are settled monthly. Balances due from reinsurers for contingent ceding commissions on quota share treaties are settled annually based on the Loss Ratio of each treaty year that ends on June 30. As discussed above, the Loss Ratios from prior years’ treaties are subject to change as incurred losses from those periods develop, resulting in an increase or decrease in the commission rate and contingent ceding commissions earned. As of December 31, 2019 and 2018, net contingent ceding commissions payable to reinsurers under all treaties was approximately $2,886,000 and $1,581,000, respectively, which is recorded in reinsurance balances payable on the accompanying consolidated balance sheets.

X
- References No definition available. + Details
Name: | us-gaap_ReinsuranceDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -URI http://asc.fasb.org/topic&trid=2303980 + Details
Name: | us-gaap_ReinsuranceTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration