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)	Effects of reinsurance on premiums written and earned

The effects of reinsurance on premiums written and earned for the years ended December 31, 2015, 2014 and 2013 are as follows:



	Year Ended December 31, 2015
	Validus Re						Talbot						Western World						AlphaCat						Eliminations						Total
	Written			Earned			Written			Earned			Written			Earned			Written			Earned			Written			Earned			Written			Earned
Direct	$	—		$	—		$	560,251		$	570,669		$	278,504		$	281,570		$	—		$	—		$	—		$	—		$	838,755		$	852,239
Assumed	1,126,759			1,141,184			458,584			467,268			—			17			176,126			164,544			(42,718		)	(45,115		)	1,718,751			1,727,898
Ceded	(149,088		)	(150,971		)	(198,896		)	(199,846		)	(18,877		)	(22,937		)	(4,538		)	(4,609		)	42,718			45,115			(328,681		)	(333,248		)
Total	$	977,671		$	990,213		$	819,939		$	838,091		$	259,627		$	258,650		$	171,588		$	159,935		$	—		$	—		$	2,228,825		$	2,246,889



	Year Ended December 31, 2014
	Validus Re						Talbot						Western World						AlphaCat						Eliminations						Total
	Written			Earned			Written			Earned			Written			Earned			Written			Earned			Written			Earned			Written			Earned
Direct	$	—		$	—		$	617,793		$	576,136		$	65,235		$	80,838		$	—		$	—		$	—		$	—		$	683,028		$	656,974
Assumed	1,118,532			1,109,659			483,977			508,634			—			—			126,785			126,534			(53,457		)	(60,912		)	1,675,837			1,683,915
Ceded	(163,678		)	(192,375		)	(192,211		)	(204,996		)	(6,428		)	(7,842		)	(4,348		)	(3,533		)	53,457			60,912			(313,208		)	(347,834		)
Total	$	954,854		$	917,284		$	909,559		$	879,774		$	58,807		$	72,996		$	122,437		$	123,001		$	—		$	—		$	2,045,657		$	1,993,055



	Year Ended December 31, 2013
	Validus Re						Talbot						AlphaCat						Eliminations						Total
	Written			Earned			Written			Earned			Written			Earned			Written			Earned			Written			Earned
Direct	$	—		$	—		$	544,722		$	519,045		$	—		$	—		$	—		$	—		$	544,722		$	519,045
Assumed	1,226,690			1,360,735			547,168			532,069			131,134			134,688			(61,268		)	(62,508		)	1,843,724			1,964,984
Ceded	(210,432		)	(226,798		)	(226,111		)	(220,420		)	(525		)	(524		)	61,268			62,508			(375,800		)	(385,234		)
Total	$	1,016,258		$	1,133,937		$	865,779		$	830,694		$	130,609		$	134,164		$	—		$	—		$	2,012,646		$	2,098,795


(b)	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 as 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 December 31, 2015, 98.7% (December 31, 2014: 98.0%) of reinsurance recoverables (which includes loss reserves recoverable and recoverables on paid losses and $214,863 of total IBNR recoverable (December 31, 2014: $231,129)) were fully collateralized or from reinsurers rated A- or better.

Reinsurance recoverables by reinsurer as at December 31, 2015 and December 31, 2014 are as follows:



	As at December 31, 2015				As at December 31, 2014
	Reinsurance Recoverable		% of Total		Reinsurance Recoverable		% of Total
Top 10 reinsurers	$	303,108	81.1	%	$	312,205	75.1	%
Other reinsurers’ balances > $1 million	61,222		16.4	%	94,247		22.7	%
Other reinsurers’ balances < $1 million	9,327		2.5	%	9,092		2.2	%
Total	$	373,657	100.0	%	$	415,544	100.0	%



	As at December 31, 2015
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Swiss Re	AA-	$	83,048	22.2	%
Lloyd's Syndicates	A+	66,356		17.8	%
Hannover Re	AA-	43,765		11.7	%
Everest Re	A+	43,060		11.5	%
Munich Re	AA-	18,707		5.0	%
Transatlantic Re	A+	11,923		3.2	%
Hamilton Re	A-	10,898		2.9	%
National Indemnity Company	AA+	10,293		2.8	%
XL Re	A+	8,728		2.3	%
Toa Re	A+	6,330		1.7	%
Total		$	303,108	81.1	%



	As at December 31, 2014
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Swiss Re	AA-	$	70,848	17.0	%
Lloyd's Syndicates	A+	62,318		15.0	%
Everest Re	A+	51,425		12.4	%
Hannover Re	AA-	40,927		9.8	%
Fully Collateralized	NR	23,315		5.6	%
Munich Re	AA-	19,384		4.7	%
Transatlantic Re	A+	12,418		3.0	%
XL Re	A+	11,114		2.7	%
Berkshire Hathaway Homestate	AA+	10,372		2.5	%
Merrimack Mutual Fire Insurance	A+	10,084		2.4	%
Total		$	312,205	75.1	%

NR: Not rated

At December 31, 2015 and December 31, 2014, the provision for uncollectible reinsurance relating to reinsurance recoverables was $4,997 and $4,755, respectively. To estimate the provision for uncollectible reinsurance, 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, especially in relation to ceded IBNR. The Company then uses default factors to determine the portion of a reinsurer’s balance deemed to be uncollectible. Default factors require considerable judgment and are determined in part using the current rating, or rating equivalent, of each reinsurer as well as other key considerations and assumptions.