Reinsurance

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Reinsurance

NOTE 12 – REINSURANCE

A reinsurance transaction occurs when an insurance company transfers (cedes) a portion of its exposure on policies written to a reinsurer that assumes that risk for a premium (ceded premium). Reinsurance does not legally discharge the Company from primary liability under its policies. If the reinsurer fails to meet its obligations, the Company must nonetheless pay its policy obligations.

Crusader’s primary excess of loss reinsurance agreements during the years ended December 31, 2017 and 2016 are as follows:

Loss Year		Reinsurers	A.M. Best Rating	Retention
	2017	Renaissance Reinsurance U.S. Inc. & Hannover Ruck SE	A A+	$	500,000
	2016	Renaissance Reinsurance U.S. Inc. & Hannover Ruck SE & TOA Reinsurance of America	A A+ A+	$	500,000

Reinsurance treaties are generally structured in layers, with different negotiated economic terms and retention of participation, or liability in each layer. In calendar years 2017 and 2016, Crusader retained a participation in its excess of loss reinsurance treaties of 10% in its 1^st layer (reinsured losses between $500,000 and $1,000,000), 0% in its 2^nd layer (reinsured losses between $1,000,000 and $3,000,000), and 0% in its property and casualty clash treaty.

Crusader also has catastrophe reinsurance treaties from various highly rated California authorized and California unauthorized reinsurance companies. These reinsurance treaties help protect Crusader against losses in excess of certain retentions from catastrophic events that may occur on property risks which Crusader insures. In calendar years 2017 and 2016, Crusader retained a participation in its catastrophe excess of loss reinsurance treaties of 5% in its 1^st layer (reinsured losses between $1,000,000 and $10,000,000) and 0% in its 2^nd layer (reinsured losses between $10,000,000 and $46,000,000).

Crusader has no reinsurance recoverable balances in dispute.

On most of the premium that Crusader cedes to the reinsurer, the reinsurer pays a commission to Crusader that includes a reimbursement of the cost of acquiring the portion of the premium that is ceded. Crusader does not currently assume any reinsurance. Crusader intends to continue obtaining reinsurance although the availability and cost may vary from time to time. The unpaid losses and loss adjustment expenses ceded to the reinsurer are recorded as an asset on the Consolidate Balance Sheets.

The effect of reinsurance on written premium, earned premium, and incurred losses and loss adjustment expenses is as follows:

	Year ended December 31
	2017			2016
Written premium:
Direct business	$	38,393,351		$	38,749,097
Reinsurance ceded		(6,765,240	)		(6,124,575	)
Net written premium	$	31,628,111		$	32,624,522
Earned premium:
Direct business	$	38,999,827		$	37,453,619
Reinsurance ceded		(6,656,508	)		(6,097,248	)
Net earned premium	$	32,343,319		$	31,356,371
Incurred losses and loss adjustment expenses:
Direct	$	43,672,969		$	27,383,996
Ceded		(13,182,462	)		(4,557,118	)
Net incurred losses and loss adjustment expenses	$	30,490,507		$	22,826,878

Ceded earned premium as a percentage of direct earned premium was 17% in 2017 and 16% in 2016. Crusader did not assume any premium or losses during the years ended December 31, 2017 and 2016.