Reinsurance

12 Months Ended

Dec. 31, 2019

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, 2019 and 2018 are as follows:

Loss Year		Reinsurers	A.M. Best Rating	Retention
	2019	Renaissance Reinsurance U.S. Inc. & Hannover Ruck SE	A+ A+	$	500,000
	2018	Renaissance Reinsurance U.S. Inc. & Hannover Ruck SE	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 year 2019, Crusader retained a participation in its excess of loss reinsurance treaties of 0% 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 $4,000,000), and 0% in its property and casualty clash treaty. In calendar year 2018, Crusader retained a participation in its excess of loss reinsurance treaties of 5% 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 $4,000,000), 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 2019 and 2018, 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 Consolidated 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
	2019			2018
Written premium:
Direct business	$	35,803,950		$	32,429,735
Reinsurance ceded		(7,153,130	)		(6,555,715	)
Net written premium	$	28,650,820		$	25,874,020
Earned premium:
Direct business	$	33,958,202		$	35,233,410
Reinsurance ceded		(7,220,734	)		(6,478,500	)
Net earned premium	$	26,737,468		$	28,754,910
Incurred losses and loss adjustment expenses:
Direct	$	36,712,252		$	30,169,562
Ceded		(14,136,125	)		(6,611,819	)
Net incurred losses and loss adjustment expenses	$	22,576,127		$	23,557,743

Ceded earned premium as a percentage of direct earned premium was 21% in 2019 and 18% in 2018. Crusader did not assume any premium or losses during the years ended December 31, 2019 and 2018.