Note 7 — Reinsurance

The Company cedes a portion of its homeowners insurance exposure to other entities under catastrophe excess of loss reinsurance treaties. The Company remains liable with respect to claims payments in the event that any of the reinsurers are unable to meet their obligations under the reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st each year. The Company purchases reinsurance taking into consideration maximum projected losses and reinsurance market conditions.

The impact of the catastrophe excess of loss reinsurance treaties on premiums written and earned is as follows:


	Three Months Ended March 31,
	2014			2013
Premiums Written:
Direct	$	79,662		$	70,849
Assumed		(723	)		(1,600	)

Gross written		78,939			69,249
Ceded		(27,508	)		(21,996	)

Net premiums written	$	51,431		$	47,253


Premiums Earned:
Direct	$	78,520		$	53,127
Assumed		15,368			29,420

Gross earned		93,888			82,547
Ceded		(27,508	)		(21,996	)

Net premiums earned	$	66,380		$	60,551

During the three months ended March 31, 2014 and 2013, there were no recoveries pertaining to reinsurance contracts that were deducted from losses incurred. At March 31, 2014 and December 31, 2013, prepaid reinsurance premiums related to 27 reinsurers and there were no amounts receivable with respect to reinsurers. Thus, there were no concentrations of credit risk associated with reinsurance receivables and prepaid reinsurance premiums as of March 31, 2014 and December 31, 2013.

Certain of the reinsurance contracts include retrospective provisions that adjust premiums, increase the amount of future coverage, or result in profit commissions in the event losses are minimal or zero. As a result, the Company’s reported revenue for the three months ended March 31, 2014 included a net reduction in ceded premiums of $5,484 comprised of various components of these adjustments. At March 31, 2014 and December 31, 2013, other assets included $13,081 and $9,009, respectively, and prepaid reinsurance premiums included $4,924 and $3,512, respectively, which are related to these adjustments. There was no reduction in ceded premiums related to retrospective provisions for the three months ended March 31, 2013.