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Reinsurance
 12 Months Ended
Dec. 31, 2019
Reinsurance Disclosures [Abstract]  
Reinsurance Reinsurance
The Company purchases reinsurance from other insurance companies ("reinsurers") in order to limit its exposure to large losses and enable it to underwrite policies with sufficient limits to meet policyholder needs. In a reinsurance transaction, an insurance
company transfers, or cedes, part or all of its exposure to the reinsurer that receives a portion of the premium. The ceding of insurance does not legally discharge the Company from its primary liability for the full amount of the policy coverage, and therefore the Company will be required to pay the loss and bear collection risk if the reinsurer fails to meet its obligations under the reinsurance agreement.
The following table summarizes the effect of reinsurance on premiums written and earned:
 
 
Year Ended December 31,
 
 
2019
 
2018
 
2017
 
 
(in thousands)
Written:
 
 
 
 
 
 
Direct
 
$
389,569

 
$
275,538

 
$
223,191

Assumed
 
125

 
—

 
—

Ceded
 
(47,633
)
 
(39,924
)
 
(33,719
)
Net written
 
$
342,061

 
$
235,614

 
$
189,472

 
 
 
 
 
 
 
Earned:
 
 
 
 
 
 
Direct
 
$
330,464

 
$
250,397

 
$
209,426

Assumed
 
104

 
—

 
—

Ceded
 
(47,587
)
 
(37,709
)
 
(33,373
)
Net earned
 
$
282,981

 
$
212,688

 
$
176,053


Incurred losses and loss adjustment expenses were net of reinsurance recoverables (ceded incurred losses and loss adjustment expenses) of $27.2 million, $25.5 million and $12.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Reinsurance balances
Credit risk exists with reinsurance ceded to the extent that any reinsurer is unable to meet the obligations assumed under the reinsurance agreements. Reinsurance recoverables for unpaid losses were $69.8 million and $55.4 million, at December 31, 2019 and 2018, respectively. Reinsurance recoverables for paid losses were $2.8 million and $1.4 million at December 31, 2019 and 2018, respectively. Ceded unearned premiums related to reinsurance were $16.1 million and $16.1 million, at December 31, 2019 and 2018, respectively. Allowances are established for amounts deemed uncollectible. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk arising from its exposure to individual reinsurers. All reinsurance receivables are from companies with A.M. Best ratings of "A" (Excellent) or better. To further reduce credit exposure to reinsurance recoverable balances, the Company has received letters of credit from certain reinsurers that are not authorized as reinsurers under U.S. state insurance regulations. The Company has not recorded an allowance for doubtful accounts related to its reinsurance balances at December 31, 2019 and 2018 and believes this to be appropriate after consideration of all currently available information; however, the deterioration in the credit quality of existing reinsurers or disputes over reinsurance agreements could result in future charges.
At December 31, 2019, the net reinsurance receivable, defined as the sum of paid and unpaid reinsurance recoverables and ceded unearned premiums less reinsurance payables, from five reinsurers represented 88.8% of the total balance.