Note 7 — Reinsurance

The Company cedes a portion of its homeowners insurance exposure to other entities under catastrophe excess of loss reinsurance and quota share treaties. The Company remains liable for claims payments in the event that any reinsurer is unable to meet its 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 probable maximum losses and reinsurance market conditions.

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Premiums Written:
Direct	$	86,257		$	78,140		$	307,199		$	281,912
Assumed		(172	)		(221	)		(1,255	)		(2,297	)

Gross written		86,085			77,919			305,944			279,615
Ceded		(27,684	)		(28,310	)		(83,764	)		(74,923	)

Net premiums written	$	58,401		$	49,609		$	222,180		$	204,692


Premiums Earned:
Direct	$	85,357		$	75,512		$	245,638		$	193,465
Assumed		3,587			5,732			28,415			52,278

Gross earned		88,944			81,244			274,053			245,743
Ceded		(27,684	)		(28,310	)		(83,764	)		(74,923	)

Net premiums earned	$	61,260		$	52,934		$	190,289		$	170,820

During the three and nine months ended September 30, 2014 and 2013, there were no recoveries pertaining to reinsurance contracts that were deducted from losses incurred. At September 30, 2014 and December 31, 2013, prepaid reinsurance premiums related to 28 and 27 reinsurers, respectively, 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 September 30, 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. These adjustments are reflected in the statements of income as net reductions in ceded premiums of $6,512 and $5,484, respectively, for the three months ended September 30, 2014 and 2013 and $17,052 and $6,785, respectively, for the nine months ended September 30, 2014 and 2013. At September 30, 2014 and December 31, 2013, other assets included $22,147 and $9,009, respectively, and prepaid reinsurance premiums included $5,941 and $3,512, respectively, which are related to these adjustments.