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Property and Casualty Insurance Activity | 9 Months Ended
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Sep. 30, 2021
Property and Casualty Insurance Activity |
6 - Property and Casualty Insurance Activity | Note 6 – Property and Casualty Insurance Activity Premiums Earned Premiums written, ceded and earned are as follows:
|  | Direct |  |  | Assumed |  |  | Ceded |  |  | Net |
Nine months ended September 30, 2021 |  |  |  |  |  |  |  |  |  |
Premiums written |  | $ | 131,609,930 |  |  | $ | - |  |  | $ | (21,854,398 | ) |  | $ | 109,755,532 |
Change in unearned premiums |  |  | (2,911,439 | ) |  |  | - |  |  |  | (15,198 | ) |  |  | (2,926,637 | )
Premiums earned |  | $ | 128,698,491 |  |  | $ | - |  |  | $ | (21,869,596 | ) |  | $ | 106,828,895 |
Nine months ended September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Premiums written |  | $ | 125,089,571 |  |  | $ | - |  |  | $ | (43,813,468 | ) |  | $ | 81,276,103 |
Change in unearned premiums |  |  | 2,215,602 |  |  |  | - |  |  |  | (2,392,318 | ) |  |  | (176,716 | )
Premiums earned |  | $ | 127,305,173 |  |  | $ | - |  |  | $ | (46,205,786 | ) |  | $ | 81,099,387 |
Three months ended September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Premiums written |  | $ | 48,865,169 |  |  | $ | - |  |  | $ | (7,223,526 | ) |  | $ | 41,641,643 |
Change in unearned premiums |  |  | (4,848,145 | ) |  |  | - |  |  |  | 9,753 |  |  |  | (4,838,392 | )
Premiums earned |  | $ | 44,017,024 |  |  | $ | - |  |  | $ | (7,213,773 | ) |  | $ | 36,803,251 |
Three months ended September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Premiums written |  | $ | 45,742,165 |  |  | $ | - |  |  | $ | (15,747,215 | ) |  | $ | 29,994,950 |
Change in unearned premiums |  |  | (3,161,356 | ) |  |  | - |  |  |  | 687,487 |  |  |  | (2,473,869 | )
Premiums earned |  | $ | 42,580,809 |  |  | $ | - |  |  | $ | (15,059,728 | ) |  | $ | 27,521,081 |
Premium receipts in advance of the policy effective date are recorded as advance premiums. The balance of advance premiums as of September 30, 2021 and December 31, 2020 was $5,325,514 and $2,660,354, respectively. Loss and Loss Adjustment Expense Reserves The following table provides a reconciliation of the beginning and ending balances for unpaid losses and loss adjustment expense (“LAE”) reserves:
|  | Nine months ended |
|  | September 30, 2021 |
|  | 2021 |  |  | 2020 |
Balance at beginning of period |  | $ | 82,801,228 |  |  | $ | 80,498,611 |
Less reinsurance recoverables |  |  | (20,154,251 | ) |  |  | (15,728,224 | )
Net balance, beginning of period |  |  | 62,646,977 |  |  |  | 64,770,387 |
Incurred related to: |  |  |  |  |  |  |  |
Current year |  |  | 79,070,646 |  |  |  | 49,597,154 |
Prior years |  |  | (10,529 | ) |  |  | (279,727 | )
Total incurred |  |  | 79,060,117 |  |  |  | 49,317,427 |
Paid related to: |  |  |  |  |  |  |  |
Current year |  |  | 35,408,412 |  |  |  | 29,845,049 |
Prior years |  |  | 17,586,958 |  |  |  | 24,068,492 |
Total paid |  |  | 52,995,370 |  |  |  | 53,913,541 |
Net balance at end of period |  |  | 88,711,724 |  |  |  | 60,174,273 |
Add reinsurance recoverables |  |  | 12,332,394 |  |  |  | 24,804,751 |
Balance at end of period |  | $ | 101,044,118 |  |  | $ | 84,979,024 |
Incurred losses and LAE are net of reinsurance recoveries under reinsurance contracts of $1,220,970 and $23,826,986 for the nine months ended September 30, 2021 and 2020, respectively. Prior year incurred loss and LAE development is based upon estimates by line of business and accident year. Prior year loss and LAE development incurred during the nine months ended September 30, 2021 and 2020 was $10,529 favorable and $279,727 favorable, respectively. Management periodically performs a review of open liability claims to assess carried case and incurred but not reported (“IBNR”) reserve levels, giving consideration to both Company and industry trends. Loss and LAE reserves The reserving process for loss and LAE reserves provides for the Company’s best estimate at a particular point in time of the ultimate unpaid cost of all losses and LAE incurred, including settlement and administration of losses, and is based on facts and circumstances then known including losses that have occurred but that have not yet been reported. The process relies on standard actuarial reserving methodologies, judgments relative to estimates of ultimate claim severity and frequency, the length of time before losses will develop to their ultimate level (‘tail’ factors), and the likelihood of changes in the law or other external factors that are beyond the Company’s control. Several actuarial reserving methodologies are used to estimate required loss reserves. The process produces carried reserves set by management based upon the actuaries’ best estimate and is the cumulative combination of the best estimates made by line of business, accident year, and loss and LAE. The amount of loss and LAE reserves for individual reported claims (the “case reserve”) is determined by the claims department and changes over time as new information is gathered. Such information is critical to the review of appropriate IBNR reserves and includes a review of coverage applicability, comparative liability on the part of the insured, injury severity, property damage, replacement cost estimates, and any other information considered pertinent to estimating the exposure presented by the claim. The amounts of loss and LAE reserves for unreported claims and development on known claims (IBNR reserves) are determined using historical information aggregated by line of insurance as adjusted to current conditions. Since this process produces loss reserves set by management based upon the actuaries’ best estimate, there is no explicit or implicit provision for uncertainty in the carried loss reserves. Due to the inherent uncertainty associated with the reserving process, the ultimate liability may differ, perhaps substantially, from the original estimate. Such estimates are regularly reviewed and updated and any resulting adjustments are included in the current period’s results. Reserves are closely monitored and are recomputed periodically using the most recent information on reported claims and a variety of statistical techniques. On at least a quarterly basis, the Company reviews by line of business existing reserves, new claims, changes to existing case reserves, and paid losses with respect to the current and prior periods. Several methods are used, varying by line of business and accident year, in order to select the estimated period-end loss reserves. These methods include the following: Paid Loss Development – historical patterns of paid loss development are used to project future paid loss emergence in order to estimate required reserves. Incurred Loss Development – historical patterns of incurred loss development, reflecting both paid losses and changes in case reserves, are used to project future incurred loss emergence in order to estimate required reserves. Paid Bornhuetter-Ferguson (“BF”) – an estimated loss ratio for a particular accident year is determined, and is weighted against the portion of the accident year claims that have been paid, based on historical paid loss development patterns. The estimate of required reserves assumes that the remaining unpaid portion of a particular accident year will pay out at a rate consistent with the estimated loss ratio for that year. This method can be useful for situations where an unusually high or low amount of paid losses exists at the early stages of the claims development process. Incurred Bornhuetter-Ferguson (“BF”) - an estimated loss ratio for a particular accident year is determined, and is weighted against the portion of the accident year claims that have been reported, based on historical incurred loss development patterns. The estimate of required reserves assumes that the remaining unreported portion of a particular accident year will pay out at a rate consistent with the estimated loss ratio for that year. This method can be useful for situations where an unusually high or low amount of reported losses exists at the early stages of the claims development process. Incremental Claim-Based Methods – historical patterns of incremental incurred losses and paid LAE during various stages of development are reviewed and assumptions are made regarding average loss and LAE development applied to remaining claims inventory. Such methods more properly reflect changes in the speed of claims closure and the relative adequacy of case reserve levels at various stages of development. These methods may provide a more accurate estimate of IBNR for lines of business with relatively few remaining open claims but for which significant recent settlement activity has occurred. Frequency / Severity Based Methods – historical measurements of claim frequency and average paid claim size (severity) are reviewed for more mature accident years where a majority of claims have been reported and/or closed. These historical averages are trended forward to more recent periods in order to estimate ultimate losses for newer accident years that are not yet fully developed. These methods are useful for lines of business with slow and/or volatile loss development patterns, such as liability lines where information pertaining to individual cases may not be completely known for many years. The claim frequency and severity information for older periods can then be used as reasonable measures for developing a range of estimates for more recent immature periods. Management’s best estimate of required reserves is generally based on an average of the methods above, with appropriate weighting of methods based on the line of business and accident year being projected. In some cases, additional methods or historical data from industry sources are employed to supplement the projections derived from the methods listed above. Three key assumptions that materially affect the estimate of loss reserves are the loss ratio estimate for the current accident year used in the BF methods, the loss development factor selections used in the loss development methods, and the loss severity assumptions used in the frequency / severity method described above. The loss ratio estimates used in the BF methods are selected after reviewing historical accident year loss ratios adjusted for rate changes, trend, and mix of business. The severity assumptions used in the frequency / severity method are determined by reviewing historical average claim severity for older more mature accident periods, trended forward to less mature accident periods. COVID-19 has introduced additional uncertainty to recent claim trends. The Company reviews the carried reserves levels at a regular basis as additional information becomes available and makes adjustments in the periods in which such adjustments are determined to be necessary. The Company is not aware of any other claim trends that have emerged or that would cause future adverse development that have not already been contemplated in setting current carried reserves levels. In New York State, lawsuits for negligence are subject to certain limitations and must be commenced within three years from the date of the accident or are otherwise barred. Accordingly, the Company’s exposure to unreported claims (“pure” IBNR) for accident dates of September 30, 2018 and prior is limited, although there remains the possibility of adverse development on reported claims (“case development” IBNR). In certain rare circumstances states have retroactively revised a statute of limitations. The Company is not aware of any such effort that would have a material impact on the Company’s results. The following is information about incurred and paid claims development as of September 30, 2021, net of reinsurance, as well as the cumulative reported claims by accident year and total IBNR reserves as of September 30, 2021 included in the net incurred loss and allocated expense amounts. The historical information regarding incurred and paid claims development for the years ended December 31, 2012 to December 31, 2020 is presented as supplementary unaudited information.
All Lines of Business |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(in thousands, except reported claims data) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | As of |
|  | Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance |  |  | September 30, 2021 |
|  | For the Years Ended December 31, |  |  |  |  |  |  |  |  | Cumulative |
Accident Year |  | 2012 |  |  | 2013 |  |  | 2014 |  |  | 2015 |  |  | 2016 |  |  | 2017 |  |  | 2018 |  |  | 2019 |  |  | 2020 |  |  | Nine months ended September 30, 2021 |  |  |  | IBNR |  |  | Number of Reported Claims by Accident Year |
|  | (Unaudited 2012 - 2020) |  |  | (Unaudited) |  |  |  |  |  |  |
2012 |  | $ | 9,539 |  |  | $ | 9,344 |  |  | $ | 10,278 |  |  | $ | 10,382 |  |  | $ | 10,582 |  |  | $ | 10,790 |  |  | $ | 10,791 |  |  | $ | 11,015 |  |  | $ | 10,885 |  |  | $ | 10,881 |  |  | $ | 11 |  |  |  | 4,704 | (1)
2013 |  |  |  |  |  |  | 10,728 |  |  |  | 9,745 |  |  |  | 9,424 |  |  |  | 9,621 |  |  |  | 10,061 |  |  |  | 10,089 |  |  |  | 10,607 |  |  |  | 10,495 |  |  |  | 10,498 |  |  |  | 19 |  |  |  | 1,564 |
2014 |  |  |  |  |  |  |  |  |  |  | 14,193 |  |  |  | 14,260 |  |  |  | 14,218 |  |  |  | 14,564 |  |  |  | 15,023 |  |  |  | 16,381 |  |  |  | 16,428 |  |  |  | 16,420 |  |  |  | 141 |  |  |  | 2,138 |
2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 22,340 |  |  |  | 21,994 |  |  |  | 22,148 |  |  |  | 22,491 |  |  |  | 23,386 |  |  |  | 23,291 |  |  |  | 23,466 |  |  |  | 123 |  |  |  | 2,558 |
2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 26,062 |  |  |  | 24,941 |  |  |  | 24,789 |  |  |  | 27,887 |  |  |  | 27,966 |  |  |  | 27,520 |  |  |  | 391 |  |  |  | 2,880 |
2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 31,605 |  |  |  | 32,169 |  |  |  | 35,304 |  |  |  | 36,160 |  |  |  | 36,337 |  |  |  | 370 |  |  |  | 3,393 |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 54,455 |  |  |  | 56,351 |  |  |  | 58,441 |  |  |  | 59,289 |  |  |  | 1,174 |  |  |  | 4,221 |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 75,092 |  |  |  | 72,368 |  |  |  | 71,837 |  |  |  | 7,377 |  |  |  | 4,471 |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 63,083 |  |  |  | 62,858 |  |  |  | 6,644 |  |  |  | 5,822 |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 74,958 |  |  |  | 18,813 |  |  |  | 4,378 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  |  | $ | 394,064 |  |  |  |  |  |  |  |  |
(1) Reported claims for accident year 2012 includes 3,406 claims from Superstorm Sandy. All Lines of Business (in thousands)
|  | Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance |
|  | For the Years Ended December 31, |  |  | Nine months ended September |
Accident Year |  | 2012 |  |  | 2013 |  |  | 2014 |  |  | 2015 |  |  | 2016 |  |  | 2017 |  |  | 2018 |  |  | 2019 |  |  | 2020 |  |  | 30, 2021 |
|  | (Unaudited 2012 - 2020) |  |  | (Unaudited) |
2012 |  | $ | 3,950 |  |  | $ | 5,770 |  |  | $ | 7,127 |  |  | $ | 8,196 |  |  | $ | 9,187 |  |  | $ | 10,236 |  |  | $ | 10,323 |  |  | $ | 10,428 |  |  | $ | 10,451 |  |  | $ | 10,544 |
2013 |  |  |  |  |  |  | 3,405 |  |  |  | 5,303 |  |  |  | 6,633 |  |  |  | 7,591 |  |  |  | 8,407 |  |  |  | 9,056 |  |  |  | 9,717 |  |  |  | 10,016 |  |  |  | 10,140 |
2014 |  |  |  |  |  |  |  |  |  |  | 5,710 |  |  |  | 9,429 |  |  |  | 10,738 |  |  |  | 11,770 |  |  |  | 13,819 |  |  |  | 14,901 |  |  |  | 15,491 |  |  |  | 15,706 |
2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12,295 |  |  |  | 16,181 |  |  |  | 18,266 |  |  |  | 19,984 |  |  |  | 21,067 |  |  |  | 22,104 |  |  |  | 22,285 |
2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 15,364 |  |  |  | 19,001 |  |  |  | 21,106 |  |  |  | 23,974 |  |  |  | 25,234 |  |  |  | 25,639 |
2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 16,704 |  |  |  | 24,820 |  |  |  | 28,693 |  |  |  | 31,393 |  |  |  | 32,161 |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 32,383 |  |  |  | 44,516 |  |  |  | 50,553 |  |  |  | 51,676 |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 40,933 |  |  |  | 54,897 |  |  |  | 57,594 |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 39,045 |  |  |  | 49,945 |
2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 33,309 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  |  | $ | 308,999 |
Net liability for unpaid loss and allocated loss adjustment expenses for the accident years presented |  | $ | 85,065 |
All outstanding liabilities before 2011, net of reinsurance |  |  | 110 |
Liabilities for loss and allocated loss adjustment expenses, net of reinsurance |  | $ | 85,175 |
Reported claim counts are measured on an occurrence or per event basis. A single claim occurrence could result in more than one loss type or claimant; however, the Company counts claims at the occurrence level as a single claim regardless of the number of claimants or claim features involved. The reconciliation of the net incurred and paid loss development tables to the loss and LAE reserves in the consolidated balance sheet is as follows:
|  | As of |
(in thousands) |  | September 30, 2021 |
Liabilities for loss and allocated loss adjustment expenses, net of reinsurance |  | $ | 85,175 |
Total reinsurance recoverable on unpaid losses |  |  | 12,332 |
Unallocated loss adjustment expenses |  |  | 3,537 |
Total gross liability for loss and LAE reserves |  | $ | 101,044 |
Reinsurance Effective December 15, 2019, the Company entered into a quota share reinsurance treaty for its personal lines business, which primarily consisted of homeowners’ policies, covering the period from December 15, 2019 through December 30, 2020 (“2019/2020 Treaty”). Effective December 31, 2020, the 2019/2020 Treaty expired on a cut off basis; this treaty was not renewed. The Company entered into new excess of loss and catastrophe reinsurance treaties effective July 1, 2021. Effective October 18, 2021, the Company entered into a stub catastrophe reinsurance treaty covering the period from October 18, 2021 through December 31, 2021. The treaty provides reinsurance coverage for catastrophe losses of $5,000,000 in excess of $5,000,000. Losses from freeze are excluded from the treaty. Material terms for reinsurance treaties in effect for the treaty years shown below are as follows:
|  | Treaty Year |
|  | December 15, 2019 |
|  | to |
Line of Business |  | December 30, 2020 |
Personal Lines: |  |  |
Homeowners, dwelling fire and |  |  |
and canine legal liability |  |  |
Quota share treaty: |  |  |
Percent ceded |  |  | 25 | %
|  | Treaty Year |
|  | July 1, 2021 |  |  | December 31, 2020 |  |  | July 1, 2020 |  |  | December 15, 2019 |
|  | to |  |  | to |  |  | to |  |  | to |
Line of Business |  | June 30, 2022 |  |  | June 30, 2021 |  |  | December 30, 2020 |  |  | June 30, 2020 |
Personal Lines: |  |  |  |  |  |  |  |  |  |  |  |
Homeowners, dwelling fire and |  |  |  |  |  |  |  |  |  |  |  |
and canine legal liability |  |  |  |  |  |  |  |  |  |  |  |
Quota share treaty: |  |  |  |  |  |  |  |  |  |  |  |
Risk retained on intial |  |  |  |  |  |  |  |  |  |  |  |
$1,000,000 of losses (7) |  | $ | 1,000,000 |  |  | $ | 1,000,000 |  |  | $ | 750,000 |  |  | $ | 750,000 |
Losses per occurrence subject |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
to quota share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
reinsurance coverage |  | None (7) |  |  | None (7) |  |  | $ | 1,000,000 |  |  | $ | 1,000,000 |
Expiration date |  | NA (7) |  |  | NA (7) |  |  | December 30, 2020 |  |  | December 30, 2020 |
Excess of loss coverage and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
facultative facility |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
coverage (1) |  | $ | 8,000,000 |  |  | $ | 8,000,000 |  |  | $ | 8,000,000 |  |  | $ | 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 (7) |  | $ | 8,000,000 |  |  | $ | 8,000,000 |  |  | $ | 8,250,000 |  |  | $ | 9,250,000 |
Losses per occurrence subject |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
to reinsurance coverage |  | $ | 9,000,000 |  |  | $ | 9,000,000 |  |  | $ | 9,000,000 |  |  | $ | 10,000,000 |
Expiration date (7) |  | June 30, 2022 |  |  | June 30, 2021 |  |  | June 30, 2021 |  |  | June 30, 2020 |
Catastrophe Reinsurance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Initial loss subject to personal |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
lines quota share treaty |  | None (7) |  |  | None (7) |  |  | $ | 7,500,000 |  |  | $ | 7,500,000 |
Risk retained per catastrophe |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
occurrence (2) (7) |  | $ | 10,000,000 |  |  | $ | 10,000,000 |  |  | $ | 8,125,000 |  |  | $ | 5,625,000 |
Catastrophe loss coverage |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
in excess of |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
quota share coverage (3) (7) |  | $ | 490,000,000 |  |  | $ | 475,000,000 |  |  | $ | 475,000,000 |  |  | $ | 602,500,000 |
Catastrophe stub coverage for the period from |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
October 18, 2021 through December 31, 2021 (8) |  | $ | 5,000,000 |  |  | NA |  |  | NA |  |  | NA |
|  | in excess of |  |  |  |  |  |  |  |  |  |  |  |  |
|  | $ | 5,000,000 |  |  |  |  |  |  |  |  |  |  |  |  |
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 through June 30, 2020. For the period July 1, 2020 through June 30, 2022, direct losses are covered up to $9,000,000.
(2) | Plus losses in excess of catastrophe coverage. For the period July 1, 2020 through December 30, 2020, there was no reinsurance coverage for the $2,500,000 gap between quota share limit of $7,500,000 and first $10,000,000 layer of catastrophe coverage (see note (7) below).
(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) | For the period July 1, 2019 through June 30, 2020, reinstatement premium protection for $292,500,000 of catastrophe coverage in excess of $7,500,000.
(5) | For the period July 1, 2020 through June 30, 2021, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(6) | For the period July 1, 2021 through June 30, 2022, reinstatement premium protection for $70,000,000 of catastrophe coverage in excess of $10,000,000.
(7) | The personal lines quota share (homeowners, dwelling fire and canine legal liability) expired on December 30, 2020; reinsurance coverage from December 31, 2020 through June 30, 2022 is only for excess of loss and catastrophe reinsurance.
(8) | Excludes freeze and freeze related claims.
|  | Treaty Year |
|  | July 1, 2021 |  |  | July 1, 2020 |  |  | July 1, 2019 |
|  | to |  |  | to |  |  | to |
Line of Business |  | June 30, 2022 |  |  | June 30, 2021 |  |  | June 30, 2020 |
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 of coverage |  |  | 95 | % |  |  | 95 | % |  |  | 100 | %
Risk retained |  | $ | 300,000 |  |  | $ | 300,000 |  |  | $ | 100,000 |
Total reinsurance coverage per occurrence |  | $ | 4,700,000 |  |  | $ | 4,700,000 |  |  | $ | 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, 2022 |  |  | June 30, 2021 |  |  | June 30, 2020 |
Commercial Lines (1): |  |  |  |  |  |  |  |  |  |  |  |
General liability commercial policies |  |  |  |  |  |  |  |  |  |  |  |
Quota share treaty |  |  |  |  |  | None |  |  | None |
Risk retained |  |  |  |  |  | $ | 750,000 |  |  | $ | 750,000 |
Excess of loss coverage above risk retained |  |  |  |  |  | $ | 3,750,000 |  |  | $ | 3,750,000 |
|  |  |  |  |  | in excess of |  |  | in excess of |
|  |  |  |  |  | $ | 750,000 |  |  | $ | 750,000 |
Total reinsurance coverage per occurrence |  |  |  |  |  | $ | 3,750,000 |  |  | $ | 3,750,000 |
Losses per occurrence subject to reinsurance coverage |  |  |  |  |  | $ | 4,500,000 |  |  | $ | 4,500,000 |
Commercial Umbrella |  |  |  |  |  |  |  |  |  |  |  |
Quota share treaty |  |  |  |  |  | None |  |  | None |
(1) | Coverage on all commercial lines policies expired in September 2020; reinsurance coverage is based on treaties in effect on the date of loss.
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. Ceding Commission Revenue The Company earned ceding commission revenue under its expired quota share reinsurance agreements based on: (i) a fixed provisional commission rate at which provisional ceding commissions were earned, and (ii) a continuing 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 three months and nine months ended September 30, 2020 are attributable to contracts under the 2019/2020 Treaty. There was no treaty in effect during the three months and nine months ended September 30, 2021. In addition to the treaty that was in effect during the three months and nine months ended September 30, 2020, 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 revenue consists of the following:
|  | Three months ended |  |  | Nine months ended |
|  | September 30, |  |  | September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Provisional ceding commissions earned |  | $ | 40,578 |  |  | $ | 3,460,768 |  |  | $ | 135,666 |  |  | $ | 10,621,804 |
Contingent ceding commissions earned |  |  | (47,854 | ) |  |  | (11,994 | ) |  |  | (98,266 | ) |  |  | 138,283 |
|  | $ | (7,276 | ) |  | $ | 3,448,774 |  |  | $ | 37,400 |  |  | $ | 10,760,087 |
Provisional ceding commissions are settled monthly. Balances due from reinsurers for contingent ceding commissions on quota share treaties are settled periodically 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 September 30, 2021 and December 31, 2020, net contingent ceding commissions payable to reinsurers under all treaties was approximately $3,083,000 and $2,604,000, respectively, which is recorded in reinsurance balances payable on the accompanying consolidated balance sheets.

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