Reinsurance (Tables)

9 Months Ended

Sep. 30, 2020

Effects of Reinsurance on Statement of Operations

Effect of Reinsurance on Statement of Operations


	Third Quarter				Nine Months
	2020		2019		2020		2019

Premiums Written:
Direct	$	122	$	67	$	334	$	156
Assumed	(1)		2		—		3
Ceded (1)	1		(1)		3		12
Net	$	122	$	68	$	337	$	171
Premiums Earned:
Direct	$	100	$	113	$	307	$	317
Assumed	8		12		28		42
Ceded	(1)		(2)		(4)		(6)
Net	$	107	$	123	$	331	$	353
Loss and LAE:
Direct	$	72	$	28	$	118	$	82
Assumed	4		2		15		4
Ceded	(3)		—		(3)		(11)
Net	$	73	$	30	$	130	$	75

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(1) Positive ceded premiums written were due to commutations and changes in expected debt service schedules.

Exposure by Reinsurer

Ceded Reinsurance (1)


	As of September 30, 2020		As of December 31, 2019
	(in millions)
Ceded premium payable, net of commissions	$	17	$	20
Ceded expected loss to be recovered (paid)	(23)		11
Financial guaranty ceded par outstanding (2)	886		1,349
Specialty ceded exposure (see Note 3)	297		303

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(1) The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of September 30, 2020 and December 31, 2019 was approximately $18 million and $68 million, respectively. Such collateral is posted (i) in the case of certain reinsurers not authorized or "accredited" in the U.S., in order for the Company to receive credit for the liabilities ceded to such reinsurers in statutory financial statements, and (ii) in the case of certain reinsurers authorized in the U.S., on terms negotiated with the Company.

(2) Of the total par ceded to BIG rated reinsurers, $74 million and $224 million is rated BIG as of September 30, 2020 and December 31, 2019, respectively.

Schedule of Commutations

In the second quarter of 2020, the Company reassumed a previously ceded portfolio of insured business from its largest remaining legacy third party financial guaranty reinsurer, which included $118 million in net par of Puerto Rico exposures.

Commutations of Ceded Reinsurance Contracts


	Nine Months
	2020		2019
	(in millions)
Increase in net unearned premium reserve	$	5	$	15
Increase in net par outstanding	336		1,069
Commutation gains (losses)	38		1