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 September 30,
	2017		2016
WRITTEN
Direct	$	14,117,001	$	13,291,126
Reinsurance assumed		114,391		100,850
Reinsurance ceded		(2,051,977)		(2,122,878)
Net	$	12,179,415	$	11,269,098
EARNED
Direct	$	13,131,193	$	12,863,943
Reinsurance assumed		111,312		94,350
Reinsurance ceded		(2,051,057)		(2,109,930)
Net	$	11,191,448	$	10,848,363
LOSS AND SETTLEMENT EXPENSES INCURRED
Direct	$	11,132,969	$	8,567,418
Reinsurance assumed		21,356		27,474
Reinsurance ceded		(3,090,924)		(2,440,730)
Net	$	8,063,401	$	6,154,162



	Nine-Month Periods Ended September 30,
	2017		2016
WRITTEN
Direct	$	40,526,640	$	39,169,359
Reinsurance assumed		217,776		232,235
Reinsurance ceded		(6,018,919)		(6,184,856)
Net	$	34,725,497	$	33,216,738
EARNED
Direct	$	38,504,368	$	37,416,387
Reinsurance assumed		228,486		237,196
Reinsurance ceded		(5,992,542)		(5,958,992)
Net	$	32,740,312	$	31,694,591
LOSSES AND SETTLEMENT EXPENSES INCURRED
Direct	$	27,585,807	$	25,815,514
Reinsurance assumed		83,814		83,424
Reinsurance ceded		(6,142,578)		(7,187,860)
Net	$	21,527,043	$	18,711,078