Reinsurance

6 Months Ended

Jun. 30, 2011

Reinsurance [Abstract]

Reinsurance

7. Reinsurance

     The Company enters into reinsurance and retrocession agreements in order to mitigate its accumulation of loss, reduce its liability on individual risks, enable it to underwrite policies with higher limits and increase its aggregate capacity. The cession of insurance and reinsurance does not legally discharge the Company from its primary liability for the full amount of the policies, and the Company is required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance or retrocession agreement. Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying liabilities.

a) Credit risk

     The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. The reinsurance program is generally placed with reinsurers whose rating, at the time of placement, was A- or better rated by Standard & Poor’s or the equivalent with other rating agencies. Exposure to a single reinsurer is also controlled with restrictions dependent on rating. At June 30, 2011, 99.1% of reinsurance recoverables (which includes loss reserves recoverable and recoverables on paid losses) were from reinsurers rated A- or better and included $98,321 of IBNR recoverable (December 31, 2010: $146,519). Reinsurance recoverables by reinsurer are as follows:

	June 30, 2011					December 31, 2010
	Reinsurance					Reinsurance
	Recoverable		% of Total			Recoverable		% of Total
Top 10 reinsurers	$	340,391		72.3	%	$	222,420		71.5	%
Other reinsurers’ balances > $1 million		119,899		25.5	%		80,221		25.8	%
Other reinsurers’ balances < $1 million		10,369		2.2	%		8,489		2.7	%
Total	$	470,659		100.0	%	$	311,130		100.0	%

	June 30, 2011
Top 10 Reinsurers	Rating		Reinsurance Recoverable		% of Total
Lloyd’s Syndicates		A+	$	74,882		22.0	%
Allianz	AA-			69,464		20.3	%
Hannover Re	AA-			35,757		10.5	%
Manulife		A-		35,000		10.3	%
Everest Re		A+		29,812		8.8	%
Tokio Marine / Tokio Millennium	AA-			26,106		7.7	%
Fully collateralized reinsurers	NR			20,396		6.0	%
Transatlantic Re		A+		17,049		5.0	%
Odyssey Reinsurance Company		A-		16,195		4.8	%
Munich Re	AA-			15,730		4.6	%
Total			$	340,391		100.0	%

	December 31, 2010
Top 10 Reinsurers	Rating		Reinsurance recoverable		% of Total
Lloyd’s Syndicates		A+	$	60,716		27.2	%
Hannover Re	AA-			32,392		14.6	%
Fully collateralized reinsurers	NR			23,750		10.7	%
Montpelier Re		A-		20,000		9.0	%
Munich Re	AA-			17,411		7.8	%
Everest Re		A+		16,611		7.5	%
Allianz	AA			14,184		6.4	%
Transatlantic Re		A+		13,758		6.2	%
Tokio Millennium Re	AA			11,980		5.4	%
Platinum Re		A		11,618		5.2	%
Total			$	222,420		100.0	%

     At June 30, 2011 and December 31, 2010, the provision for uncollectible reinsurance relating to losses recoverable was $6,200 and $5,652, respectively. To estimate the provision for uncollectible reinsurance recoverable, the reinsurance recoverable is first allocated to applicable reinsurers. This determination is based on a process rather than an estimate, although an element of judgment is applied. As part of this process, ceded IBNR is allocated by reinsurer. Of the $470,659 reinsurance recoverable at June 30, 2011, $20,396 was fully collateralized (December 31, 2010: $23,750).

     The Company uses a default analysis to estimate uncollectible reinsurance. The primary components of the default analysis are reinsurance recoverable balances by reinsurer and default factors used to determine the portion of a reinsurer’s balance deemed to be uncollectible. Default factors require considerable judgment and are determined using the current rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions.