In the normal course of business, the Company participates in reinsurance agreements in order to limit losses that may arise from catastrophes or other individually severe events. The Company ceded primarily all specific commercial liability risks in excess of $340,000 in 2022, and $400,000 in 2021. The Company ceded specific commercial property risks in excess of $300,000 in 2022 and ceded specific commercial property risks in excess of $200,000 in 2021. The Company ceded homeowners specific risks in excess of $300,000 in both 2022 and 2021.

A "treaty" is a reinsurance agreement in which coverage is provided for a class of risks and does not require policy by policy underwriting of the reinsurer. "Facultative" reinsurance is where a reinsurer negotiates an individual reinsurance agreement for every policy it will reinsure on a policy by policy basis. A loss is covered under a reinsurance contract if the loss occurs within the effective dates of the agreement notwithstanding when the loss is reported.

Reinsurance does not discharge the direct insurer from liability to its policyholders. 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 the concentration 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. To date, the Company has not experienced any significant difficulties in collecting reinsurance recoverables.

The Company assumes written premiums under a few fronting arrangements. The fronting arrangements are with unaffiliated insurers who write on behalf of the Company in markets that require a higher A.M. Best rating than the Company’s current rating, where the policies are written in a state where the Company is not licensed or for other strategic reasons.

The following table presents the effects of reinsurance and assumption transactions on written premiums, earned premiums and losses and LAE (dollars in thousands):

	Three Months Ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Written premiums:
Direct	$	22,682		$	24,239		$	73,789		$	73,825
Assumed		10,406			9,465			29,681			25,233
Ceded		(9,395	)		(7,635	)		(34,490	)		(19,974	)
Net written premiums	$	23,693		$	26,069		$	68,980		$	79,084

Earned premiums:
Direct	$	24,679		$	23,858		$	73,667		$	67,455
Assumed		9,722			7,912			27,280			22,790
Ceded		(9,443	)		(6,829	)		(27,458	)		(17,631	)
Net earned premiums	$	24,958		$	24,941		$	73,489		$	72,614

Losses and LAE:
Direct	$	15,837		$	14,511		$	46,375		$	50,628
Assumed		7,225			4,422			26,136			11,251
Ceded		(6,391	)		(2,774	)		(15,571	)		(8,432	)
Net Losses and LAE	$	16,671		$	16,159		$	56,940		$	53,447

Some of the excess of loss treaties that renewed on December 31, 2021 and January 1, 2022, included ceding commissions equal to 40% of the ceded premiums. The ceding commission is reflected as a reduction in acquisition costs and amounted to $2.1 million and $6.4 million for the three and nine months ended September 30, 2022. There were no ceding commissions reflected in the Consolidated Statements of Operations in 2021, relating to the excess of loss reinsurance treaties during 2021.