5. REINSURANCE

In the ordinary course of business, the Company assumes and cedes premiums and selected insured risks with other insurance companies, known as reinsurance. A large portion of the reinsurance is put into effect under contracts known as treaties and, in some instances, by negotiation on each individual risk (known as facultative reinsurance). In addition, there are several types of treaties including quota share, excess of loss and catastrophe reinsurance contracts that protect against losses over stipulated amounts arising from any one occurrence or event. The arrangements allow the Company to pursue greater diversification of business and serve to limit the maximum net loss to a single event, such as a catastrophe. Through the quantification of exposed policy limits in each region and the extensive use of computer-assisted modeling techniques, management monitors the concentration of risks exposed to catastrophic events.

Through the purchase of reinsurance, the Company also generally limits its net loss on any individual risk to a maximum of $500,000, although certain treaties contain an annual aggregate deductible before reinsurance applies.

Premiums, written and earned, along with losses and settlement expenses incurred for the periods presented is summarized as follows:



	Three-Month Periods Ended June 30,
	2017		2016
WRITTEN
Direct	$	13,821,048	$	13,801,168
Reinsurance assumed		63,549		85,665
Reinsurance ceded		(1,990,712)		(2,106,014)
Net	$	11,893,885	$	11,780,819
EARNED
Direct	$	12,580,381	$	12,447,927
Reinsurance assumed		67,956		83,482
Reinsurance ceded		(1,937,579)		(1,975,943)
Net	$	10,710,758	$	10,555,466
LOSS AND SETTLEMENT EXPENSES INCURRED
Direct	$	8,583,336	$	5,958,742
Reinsurance assumed		20,026		33,351
Reinsurance ceded		(1,739,104)		185,327
Net	$	6,864,258	$	6,177,420



	Six-Month Periods Ended June 30,
	2017		2016
WRITTEN
Direct	$	26,409,639	$	25,878,233
Reinsurance assumed		103,385		131,385
Reinsurance ceded		(3,966,942)		(4,061,978)
Net	$	22,546,082	$	21,947,640
EARNED
Direct	$	25,373,175	$	24,552,444
Reinsurance assumed		117,174		142,846
Reinsurance ceded		(3,941,485)		(3,849,062)
Net	$	21,548,864	$	20,846,228
LOSSES AND SETTLEMENT EXPENSES INCURRED
Direct	$	16,452,838	$	17,248,096
Reinsurance assumed		62,458		55,950
Reinsurance ceded		(3,051,654)		(4,747,130)
Net	$	13,463,642	$	12,556,916