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Reinsurance
 12 Months Ended
Dec. 31, 2019
Reinsurance Disclosures [Abstract]  
Reinsurance Reinsurance

In reinsurance and retrocession transactions, an insurance or reinsurance company transfers, or cedes, all or part of its exposure in return for a premium. The ceding of insurance does not legally discharge the Company from its primary liability for the full amount of the policies, and the Company will be required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance or retrocessional agreement. A credit risk exists with ceded reinsurance to the extent that any reinsurer is unable to meet the obligations assumed under the reinsurance or retrocessional contracts. Allowances are established for amounts deemed uncollectible.

Within its underwriting operations, the Company uses reinsurance and retrocessional reinsurance to manage its net retention on individual risks and overall exposure to losses while providing it with the ability to offer policies with sufficient limits to meet policyholder needs. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. To further reduce credit exposure to reinsurance recoverable balances, the Company has received collateral, including letters of credit and trust accounts, from certain reinsurers. Collateral related to these reinsurance agreements is available, without restriction, when the Company pays losses covered by the reinsurance agreements.

Within the Company's underwriting operations, at December 31, 2019 and 2018, balances recoverable from the ten largest reinsurers, by group, represented 62% and 61%, respectively, of reinsurance recoverables before considering reinsurance allowances and collateral. At December 31, 2019, the largest reinsurance balance was due from Fairfax Financial Group and represented 10% of reinsurance recoverables before considering reinsurance allowances and collateral.

Within the Company's program services business, the Company generally enters into 100% quota share reinsurance agreements whereby the Company cedes to the capacity provider (reinsurer) substantially all of its gross liability under all policies issued by and on behalf of the Company by the general agent. However, there are certain programs that contain limits on the reinsurers’ obligations to the Company that expose the Company to underwriting risk, including loss ratio caps, exclusions of the credit risk of producers and aggregate reinsurance limits that the Company believes are unlikely to be exceeded. The Company also remains exposed to the credit risk of the reinsurer, or the risk that one of its reinsurers becomes insolvent or otherwise unable or unwilling to pay policyholder claims. This credit risk is generally mitigated by either selecting well capitalized, highly rated authorized capacity providers or requiring that the capacity provider post substantial collateral to secure the reinsured risks.

Within the Company's program services business, at December 31, 2019 and 2018, balances recoverable from the ten largest reinsurers, by group, represented 71% and 75%, respectively, of reinsurance recoverables before considering reinsurance allowances and collateral. At December 31, 2019, the largest reinsurance balance was due from Fosun International Holdings Ltd. and represented 21% of reinsurance recoverables before considering reinsurance allowances and collateral.

The following tables summarize the effect of reinsurance and retrocessional reinsurance on premiums written and earned.

 
Year Ended December 31, 2019
(dollars in thousands)
Direct
 
Assumed
 
Ceded
 
Net Premiums
Underwriting:
 
 
 
 
 
 
 
Written
$
5,084,641

 
$
1,349,686

 
$
(1,024,097
)
 
$
5,410,230

Earned
$
4,767,836

 
$
1,289,375

 
$
(1,008,970
)
 
$
5,048,241

Program services and other:
 
 
 
 
 
 
 
Written
2,256,747

 
88,897

 
(2,343,803
)
 
1,841

Earned
2,194,671

 
78,778

 
(2,271,897
)
 
1,552

Consolidated:
 
 
 
 
 
 
 
Written
$
7,341,388

 
$
1,438,583

 
$
(3,367,900
)
 
$
5,412,071

Earned
$
6,962,507

 
$
1,368,153

 
$
(3,280,867
)
 
$
5,049,793

 
Year Ended December 31, 2018
(dollars in thousands)
Direct
 
Assumed
 
Ceded
 
Net Premiums
Underwriting:
 
 
 
 
 
 
 
Written
$
4,562,256

 
$
1,236,740

 
$
(1,013,406
)
 
$
4,785,590

Earned
$
4,384,562

 
$
1,291,032

 
$
(964,549
)
 
$
4,711,045

Program services and other:
 
 
 
 
 
 
 
Written
2,022,548

 
42,925

 
(2,063,485
)
 
1,988

Earned
1,850,656

 
28,581

 
(1,878,222
)
 
1,015

Consolidated:
 
 
 
 
 
 
 
Written
$
6,584,804

 
$
1,279,665

 
$
(3,076,891
)
 
$
4,787,578

Earned
$
6,235,218

 
$
1,319,613

 
$
(2,842,771
)
 
$
4,712,060

 
Year Ended December 31, 2017
(dollars in thousands)
Direct
 
Assumed
 
Ceded
 
Net Premiums
Underwriting:
 
 
 
 
 
 
 
Written
$
3,919,602

 
$
1,333,505

 
$
(835,320
)
 
$
4,417,787

Earned
$
3,777,335

 
$
1,286,043

 
$
(815,400
)
 
$
4,247,978

Program services and other:
 
 
 
 
 
 
 
Written
252,865

 
988

 
(253,853
)
 
—

Earned
291,287

 
1,352

 
(292,639
)
 
—

Consolidated:
 
 
 
 
 
 
 
Written
$
4,172,467

 
$
1,334,493

 
$
(1,089,173
)
 
$
4,417,787

Earned
$
4,068,622

 
$
1,287,395

 
$
(1,108,039
)
 
$
4,247,978



Substantially all of the premium written and earned in the Company's program services and other fronting operations for the years ended December 31, 2019, 2018 and 2017 was ceded. The percentage of consolidated ceded earned premiums to gross earned premiums was 39%, 38% and 21% for the years ended December 31, 2019, 2018 and 2017, respectively. The percentage of consolidated assumed earned premiums to net earned premiums was 27%, 28% and 30% for the years ended December 31, 2019, 2018 and 2017, respectively.

Substantially all of the incurred losses and loss adjustment expenses in the Company's program services and other fronting operations, which totaled $1.6 billion and $1.3 billion for the years ended December 31, 2019 and 2018, respectively, were ceded.

The following table summarizes the effect of reinsurance and retrocessional reinsurance on losses and loss adjustment expenses in the Company's underwriting operations.

 
Years ended December 31,
(dollars in thousands)
2019
 
2018
 
2017
Gross
$
3,447,186

 
$
3,530,790

 
$
3,722,604

Ceded
(556,618
)
 
(710,568
)
 
(856,843
)
Net losses and loss adjustment expenses
$
2,890,568

 
$
2,820,222

 
$
2,865,761