Reinsurance premiums ceded

3 Months Ended

Mar. 31, 2014

Reinsurance Disclosures [Abstract]

Reinsurance premiums ceded

Reinsurance premiums ceded

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. Additionally, retrocession can be used as a mechanism to share the risks and rewards of business written and therefore can be used as a tool to align the Company’s interests with those of its counterparties. The Company currently has coverage that provides for recovery of a portion of loss and loss adjustment expenses incurred on one crop contract written in 2013. Loss and loss adjustment expenses recoverable from the retrocessionaire are recorded as assets. For the three months ended March 31, 2014, loss and loss adjustment expenses incurred and reported on the condensed consolidated statements of income are net of loss and loss expenses recovered of $1.0 million (2013 - $2.1 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. As of March 31, 2014, the Company had loss and loss adjustment expenses recoverable of $10.3 million (December 31, 2013 - $9.3 million) with one retrocessionaire who was rated “A (Excellent)” by A.M. Best Company. The Company regularly evaluates the financial condition of its retrocessionaires to assess the ability of the retrocessionaires to honor their obligations.