RETROCESSION

6 Months Ended

Jun. 30, 2020

Reinsurance Disclosures [Abstract]

RETROCESSION

RETROCESSION

The Company, from time to time, purchases retrocessional coverage for one or more of the following reasons: to manage its overall exposure, to reduce its net liability on individual risks, to obtain additional underwriting capacity and to balance its underwriting portfolio. Loss and loss adjustment expenses recoverable from retrocessionaires are recorded as assets.

For the three and six months ended June 30, 2020, the Company’s earned ceded premiums were $0.5 million and $1.5 million, respectively (2019: $21.7 million and $43.8 million, respectively). For the three and six months ended June 30, 2020, loss and loss adjustment expenses incurred of $89.2 million and $164.9 million, respectively (2019: $78.5 million and $201.3 million, respectively), reported on the condensed consolidated statements of operations are net of loss and loss expenses recovered and recoverable of $0.2 million and $3.7 million (2019: $15.9 million and $42.3 million).

Retrocession contracts do not relieve the Company from its obligations to the insureds. Failure of retrocessionaires to honor their obligations could result in losses to the Company. At June 30, 2020, the Company’s loss reserves recoverable consisted of (i) $15.8 million (December 31, 2019: $21.2 million) from unrated retrocessionaires, of which $15.4 million (December 31, 2019: $20.0 million) were secured by cash, letters of credit and collateral held in trust accounts for the benefit of the Company and (ii) $4.5 million (December 31, 2019: $6.4 million) from retrocessionaires rated A- or above by A.M. Best.

The Company regularly evaluates its net credit exposure to assess the ability of the retrocessionaires to honor their respective obligations. At June 30, 2020, the Company had recorded an allowance for expected credit losses of $0.1 million (December 31, 2019: nil).