Reinsurance

The Company's reinsurance balances recoverable at September 30, 2016 and December 31, 2015 were as follows:



	September 30, 2016		December 31, 2015
Loss reserves recoverable on unpaid:
Outstanding losses	$	174,210	$	135,723
IBNR	270,399		214,863
Total loss reserves recoverable	444,609		350,586
Paid losses recoverable	36,069		23,071
Total reinsurance balances recoverable	$	480,678	$	373,657

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.

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. As at September 30, 2016, $474,367 or 98.7% (December 31, 2015: $368,638 or 98.7%) of the Company's reinsurance balances recoverable were either fully collateralized or recoverable from reinsurers rated A- or better.

At September 30, 2016 and December 31, 2015, the provision for uncollectible reinsurance relating to reinsurance balances recoverable was $5,140 and $4,997, respectively. To estimate this provision for uncollectible reinsurance, reinsurance balances recoverable are 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.

Top ten reinsurers

Reinsurance balances recoverable by reinsurer as at September 30, 2016 and December 31, 2015 were as follows:



	September 30, 2016				December 31, 2015
	Reinsurance Recoverable		% of Total		Reinsurance Recoverable		% of Total
Top 10 reinsurers	$	401,760	83.6	%	$	303,108	81.1	%
Other reinsurers’ balances > $1 million	73,005		15.2	%	61,222		16.4	%
Other reinsurers’ balances < $1 million	5,913		1.2	%	9,327		2.5	%
Total	$	480,678	100.0	%	$	373,657	100.0	%

The following tables show the reinsurance balances recoverable due from, and the ratings associated with, the Company's top ten reinsurers as at September 30, 2016 and December 31, 2015:



	September 30, 2016
Top 10 Reinsurers	Rating	Reinsurance Recoverable		% of Total
Swiss Re	AA-	$	84,388	17.7	%
Fully collateralized reinsurers	NR	84,296		17.5	%
Lloyd's Syndicates	A+	77,607		16.1	%
Hannover Re	AA-	49,699		10.3	%
Everest Re	A+	46,130		9.6	%
Munich Re	AA-	17,498		3.6	%
Hamilton Re	A-	12,502		2.6	%
Transatlantic Re	A+	11,624		2.4	%
Toa Re	A+	9,011		1.9	%
XL Re	A+	9,005		1.9	%
Total		$	401,760	83.6	%



	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	%