• Filing Date: 2017-02-22
  • Form Type: 10-K
  • Description: Annual report
12 Months Ended
Dec. 31, 2016
Insurance [Abstract]  

Note 14 — Reinsurance

The Company cedes a portion of its homeowners’ insurance exposure to other entities under catastrophe excess of loss reinsurance treaties and one quota share arrangement which was terminated effective May 31, 2016. The Company remains liable for claims payments in the event that any reinsurer is unable to meet its obligations under the reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st each year. The Company purchases reinsurance each year taking into consideration probable maximum losses and reinsurance market conditions.

The impact of the catastrophe excess of loss reinsurance treaties and one quota share arrangement on premiums written and earned is as follows:


     Years Ended December 31,  
     2016      2015      2014  

Premiums Written:



   $ 352,803       $ 393,009       $ 341,685   


     14,388         3,329         65,968   










Gross written

     367,191         396,338         407,653   


     (135,051      (140,614      (113,423










Net premiums written

   $ 232,140       $ 255,724       $ 294,230   










Premiums Earned:



   $ 372,699       $ 360,878       $ 332,175   


     5,979         62,242         33,313   










Gross earned

     378,678         423,120         365,488   


     (135,051      (140,614      (113,423










Net premiums earned

   $ 243,627       $ 282,506       $ 252,065   










During the years ended December 31, 2016, 2015 and 2014, there were no recoveries pertaining to reinsurance contracts that were deducted from losses incurred. At December 31, 2016 and 2015, there were 35 and 21 reinsurers, respectively, participating in the Company’s reinsurance program. There were no amounts receivable with respect to reinsurers at December 31, 2016 and 2015. Thus, there were no concentrations of credit risk associated with reinsurance receivables as of December 31, 2016 and 2015. In addition, based on the insurance ratings and the financial strength of the reinsurers, management believes there was no credit risk associated with its reinsurers’ obligations to perform on any prepaid reinsurance contract as of December 31, 2016 and 2015. The ratio of assumed premiums earned to net premiums earned for the years ended December 31, 2016, 2015 and 2014 was 2.5%, 22.0%, and 13.2%, respectively.


Certain of the reinsurance contracts include retrospective provisions that adjust premiums or increase the amount of future coverage in the event losses are minimal or zero. Effective June 1, 2016, retrospective provisions include premium adjustments only. These adjustments are reflected in the consolidated statements of income as net reductions in ceded premiums of $12,677, $18,322 and $23,543, respectively, for the years ended December 31, 2016, 2015 and 2014, respectively, of which $1,929, $2,797 and $2,592 relate to the Company’s contract with Oxbridge Reinsurance Limited (see Note 25 — “Related Party Transactions”). In June 2016, the Company received a total of $37,800 in cash benefits related to two retrospective reinsurance contracts that terminated May 31, 2016 of which $7,560 was received from Oxbridge. In September 2016, the Company received the final cash payment of $5,716 under the terms of the remaining retrospective reinsurance contract which terminated May 31, 2016.

In addition, these adjustments are reflected in other assets and prepaid reinsurance premiums. At December 31, 2016 and 2015, other assets included $5,810 and $36,176, respectively, of which $1,043 and $6,499 related to the contract with Oxbridge and prepaid reinsurance premiums included $2,152 and $2,625, respectively, of which $338 and $513 related to the contract with Oxbridge. Management believes the credit risk associated with the collectability of these accrued benefits is minimal as the amount receivable is concentrated with one reinsurer and the Company monitors the creditworthiness of this reinsurer based on available information about the reinsurer’s financial position.